The Death of TSLA

The irrational exuberance around Tesla and its business model will likely fall apart as consumers who can afford their cars already own one and those who are planning on buying will no longer have the money to do so. The excitement around the stock will likely also fall apart as the price continues to decline as many only own because the price has kept going up. It's a bubble and it's popped. The bull trap is nothing more and the air is going to come out - fast! Buy your puts now, I sure am.

Comment:

Since this post has been getting a fair amount of attention, I wanted to clarify a few things. I wrote the original description in haste and have tried to further explain my thoughts in the comments, but might as well do so here . My primary focus when investing is on the broad market. I have been net short the US stock market and long gold/silver and the gold mining stocks for months. During the March sell-off, my short positions performed well (QQQ, SPY, AAPL) and as we put in a short term bottom reallocated short positions to more gold mining companies which hadn't performed well during the sell-off. The FED will have to print so much money to try to keep air in the markets it will create massive inflation, but this inflation will not appear consistently throughout all financial assets. Gold/Silver and the miners will benefit the most. Stocks like Tesla not so much. When food prices start shooting up, people will not be thinking about buying stocks or new cars, they'll focus on putting food on the table with the wealth they do have left.

Moving on to this post, now that the market has recovered so quickly, the risk to reward for being long is very poor. With the VIX at support, I believe we are in for another large run up in the short term (and stock prices in for a large and swift move down). This makes put buying attractive at these levels with the potential for the trap door to open up on US stocks. I had not been short/buying puts on Tesla on the first leg down, but now with the price so elevated in a short time period, I have a hard time believing the air will stay in the stock. Because of the large moves we've had, in both directions it's far easier to use TA to get a feel for where the stock is going next and when. I'm more interested in capturing the move from the current price, to back below $400.

When I use the title 'The death of TSLA' it's a bit sensational sure, look at all the action on the post it's gotten. My point is while I don't believe Tesla as the brand will die, I do believe the enthusiasm for the stock will die. As evident by many of the Telsa bulls on this post, I get the understanding there is no regard for price among this group - just buy and hold at any level, because it'll be way higher in the future. This action has been rewarded as the price has gone up, and these bulls have likely been sucked into buying at higher and higher levels, which are not justified buy the fundamental valuation of the company. When the value of the stock collapses, many of these bulls will throw money into the fire assuming it'll come back. When they realize the price was a bubble, they'll capitulate and sell. Then, and only then, would I consider going long on Tesla - when the bulls on this thread, admit they sold all their Tesla stock at a massive loss.

Comment:

While this post may have been early, I believe now we will see waterfall selling over the next few weeks taking us to my initial price targets. Even Elon Musk is admitting his company is overvalued. Who in their right mind would buy Tesla now? Only sellers left.