At first glance I thought the news out of TSLA this morning was a cruel April Fools joke aimed at the 50% short interest in the shares, but the company stated that their Model S sales have exceeded previous expectations, and they actually expect to turn a profit in the first quarter. The news sent TSLA up more than 20% at one point today, and it’s still up 16% as I write.
I actually had a bullish trade structure on TSLA that I took off last month for a profit when the stock stalled near the $40 resistance level. My profit was nothing compared to what I would have made if I still held the trade today. But hindsight is 20/20. The stock could have been down 20% today and my options would be worthless.
Leaving the past in the past, what’s more important is whether there is a good trade in TSLA going forward.
Here’s the lifetime chart:
The $40 level (annotated with a red line) was resistance in 2012 and 2013, and it gapped through that resistance level today, on its largest volume since the stock’s IPO (lower panel). I anticipate that $40 will be important support going forward, as all of those who missed out on buying the breakout will look for an entry in the 40-41 level. For now, the stock is in unchartered territory, and with on reference points, I have little inclination to initiate a new trade. But if the stock does offer a pullback opportunity to near breakout support, I’ll be ready to put on another bullish TSLA trade.