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Friday, May 31, 2013

Shorting Tesla?

Tesla Motors (TSLA) is a company that designs, develops, manufactures, and sells electric vehicles and electric vehicle powertrain components. All the sudden, TSLA has become the Wall Street darling. TSLA has advanced almost 100% in the past 2 weeks (see below). It is definitely parabolic! Whenever something becomes parabolic, it will end badly with no exception!! So it is time to short TSLA? Not necessarily so. Shorting anything is not an easy job, especially when everyone wants to short. TSLA is probably among those stocks which have the highest shorting interest these days. There are 40% positions shorting TSLA. If TSLA refuses to immediately go down but rather goes up for a while, there will be a so-called short squeeze: those shorting it on margin will be forced to cover by buying back the stocks, which will further propel the popping up of the stock price. While it is very tempting to short TSLA, I'm not brave enough to do so at the moment. But I did notice that TSLA dropped hard today by 7%.  It will be fun to see how TSLA will go in the next few weeks. If it jumps back and becomes more parabolic, then it may be a good time to short it.


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