Is Tesla poised for a big move?

I was asked by a friend about Tesla and notice something interesting. But let me be clear upfront: I’m not a big fan of Tesla fundamentally and by no means I’m promoting TSLA for a long-term investment. Yes, Musk is a genius and visionary in many senses but I think TSLA’s business model is in a wrong footing. It seems, there is no chance for Tesla to ever make money regardless how much people love its cars. Actually more cars it sells, more money it is losing. That’s why you don’t need to expect any fundamental improvement for TSLA from its earnings. People are simply betting on Mousk’s visions to pump up its share prices but eventually it has to face its fundamental reality. So enough warning regarding its fundamental risks if you are thinking to buy TSLA for long term.

Having said that, I do see TSLA is quite attractive from the technical perspective. A while ago I said I was interested in TSLA’s technical and I’m still having money betting on it. Considering its wide swing potential, I’m holding TSLA via a bullish put spread $305/310 that is expiring this Friday. In other words, as long as TSLA can hold up above $310 by end of Friday, I’m making full profit from the trade. I think there is a good chance it will. Tesla had been in an up channel since Dec last year until its recent earnings a few days ago. It tanked hard by dropping over 30 points but since then has been moving up. What really attracts me most is its weekly charting. The recent hard crash didn’t damage its weekly technical much. Actually it is showing a very bullish positive divergence for its momentum MACD. More importantly, it is forming a gigantic bull flag with a huge pole beneath it. What does it mean? Well, while no guarantee, a bull flag often leads to a break out to the upside and if so, the next up-move often in the scale comparable to the length of the pole. In other words, if TSLA can break out its resistance around $360 as I’m writing, it has a potential to shoot up all the way to 100 points above, i.e. about $460 roughly. Given the bullish weekly technical pattern, I think there is a good chance TSLA may surprise and crash its bears in the next few months. Actually back in Nov last year, Tesla was in a similar setup and it indeed jumped about 100 points in the following months.  

Of course, any speculation equally carries its risk. If TSLA falls below the flag bottom around $300, then the bullish bet is off and TSLA may drop all the way down by 100 points as well. Regardless what you want to do, always consider the risk/reward ratio whether it is suitable for you!