Tesla has been one of the most controversial large caps stocks of the past year. There are several key incidents in the past 2 months that have gotten Elon Musk in trouble with the SEC, and have lead to some ridiculous volatility in the Tesla stock. This has created some great opportunities in the stock for momentum traders as well. Let’s start by doing a brief background explaining the controversy, and then look at the lessons for us as traders:

Background

There has always been a lot of controversy around TSLA and Elon Musk. It is one of the most shorted large cap stocks in the market, mainly due to its questionable fundamentals, ability to be profitable, and Elon Musk’s leadership abilities. In the past few months it has reached completely new levels of controversy. The mayhem began when Musk tweeted on August 7th: “Am considering taking Tesla private at $420. Funding Secured.” This tweet lead to some insane volatility in the stock for the next week, and month. Shareholders were left baffled about what the future of Tesla, as the erratic behavior of the CEO is creating a ton of doubt and uncertainty around the company.

SEC Punishment

The “funding secured” tweet created a lot of concern about his ability to take Tesla. Recently, the SEC decided to take action against Elon Musk and filed a lawsuit against him for the comments, based on the fact he did not actually secure the funding, and was misleading investors and shareholders. Musk and the SEC reached a settlement deal which forced him to step down as Tesla’s chairman and pay a $20 million fine.

The stock rallied on the news that Elon Musk came to a settlement agreement with the SEC. But then the situation quickly reversed on Tesla shareholders. Elon Musk on October 4th put out tweet mocking the SEC: “Just want to that the Shortseller Enrichment Commission is doing incredible  work. And the name change is so on point!” The stock tanked on Friday and is now trading in the 260’s, after trading in the 300’s just 3 days ago.

TSLA Daily

You can see how crazy the volatility has been in the TSLA stock for the past two months. Two times we have seen it tank to $250, and then bounce all the way back to the 300’s. The “funding secured” tweet caused TSLA’s stock to spike to all time highs, and then dump 100 points in the following days. This is has been an amazing stock for day traders the past several months. But not great for longer term investors. TSLA has been getting hammered the last few days following Musk’s tweet taunting the SEC. It is now approaching the key $250 support area, which has held the last two tests. If this level breaks convincingly, we could get a great shorting opportunity and see a quick dump towards the low 200’s.  

Price Action Is King

Despite the questionable fundamentals of Tesla for many years, the stock has gone on a monster run the past few years, steamrolling the outspoken short sellers. Tesla bears for years have talked about how overvalued the stock, but for years the stock has continued to raise and squeeze shorts. There are ton of short sellers that blew up the past few years because of Tesla. They did not respect price action, and got stubborn. But now we are seeing signs that Tesla’s bull run could be coming to an end. The combination of Musk’s irrational behavior and the lower highs and lower lows on the daily chart could be spelling a sharp downturn in the stock in the near future. 

Don’t Chase Strength Or Weakness

TSLA has seen some ridiculous swings the past couple of months. You can see on its daily chart how many times it has gone up and down 10% in a day. It has gone on several 100 point runs to the upside, and then gives it all back. A crucial lesson is that you cannot chase stocks just because they break all-time highs. If you bought TSLA when it broke out to all time highs last month, you’d be down over 30% right now. When trading a stock as volatile as Tesla, you have to be patient for the best entries and let the stock come to you. Never chase strength or weakness because you have FOMO.   

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TSLA has been one of the most controversial stocks this year. There have been some serious doubts about Elon Musk’s ability to get the company profitable in the future. TSLA surprised everyone with their earnings results (or at least how the market interpreted them), and the stock had a huge squeeze last week.  

Despite all of the concerns behind the fundamentals of the company, the stock is approaching all time highs near 400’s. Musk added more fuel to the fire by saying he is considering taking the company private at $420 a share. All this news created some great momentum in TSLA stock, and we had some great day trades on it. Here is a video recap of how we traded TSLA last week:

HUGE Short Interest

TSLA was on my radar last week after it gapped and it ran in response to better than expected earnings results. TSLA has a enormous amount of people short the stock, with over a quarter of the float short, according to shortsqueeze.com. This means when the stock gaps up and breaks out like it did last week, there will be a lot of people underwater and possibly looking to exit their position.

Many people are daunted by the share price of TSLA, and don’t day trade it because they perceive it to be too expensive. The share price of the stock doesn’t matter when you are looking at something to day trade, its the range it has. It has a 20-30 point range on some days. Even if you only by 50 shares of it and you only capture 10 points of the range, you will still make $500.  

VWAP Pullback

The VWAP pullback was the setup we used the other week to trade IRBT. We used it again to get a low-risk high reward entry on TSLA. It is one of the best setups to use for afternoon trading. I missed the opening move on TSLA, and I didn’t want to chase it. I finally got the pullback to VWAP and I took a long at around $360, and sold it on the spike towards $370. Unfortunately I didn’t hold any shares through the new halt! Learn more how to trade VWAP pullbacks in this article here.

Always Respect Price Action

TSLA in the past several years is a great example of the importance of respecting price action. The company is not profitable, and there are reasons to think that the company may never be profitable. There is a good fundamental reason to be short the TSLA stock. But there is no technical reason. Take a look at its weekly chart:

The stock is in an UPTREND. You can see how every dip gets bought up. You don’t short stocks in a strong uptrend, at least for extended periods of time. Wait for the backside and join the trend, instead of trying to pick a top. There are plenty of junk companies that continue to run despite having questionable fundamentals. You cannot short something just because it has questionable fundamentals. You need to align it with a technical pattern, so you know there will be a high probability of there being more sellers than buyers so that the stock will depreciate in value. Not respecting price action as a short seller is the easiest way to blow up your trading account.

What are your thoughts on TSLA? Tweet me and let me know.

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There are two types of capital in trading. You have your financial capital, which is your account size and max loss per trade/day and then you have your mental capital. This refers to whether you’re able to stay alert and follow your game plan throughout the day. This way you can hit the stocks on your watchlist when the time comes.

NVDA

On July 5th, I got stuck at the open trading NVDA. It got stuck in a range the entire morning. I had a whole host of stocks that were my top plays for the day. But i blew so much time on NVDA that I essentially checked out. I hit my max pain for the day, and I started missing the rest of my plays.

NVDA gapped up and I was playing this stock for a green to red. I caught a short at the open, but it spiked up causing my win to turn into a loss. That irked me because I’m usually not that greedy. I went for the home run and added too low. I then shorted NVDA with the anticipation of the break under the VWAP. It came down to 141.80 and then boom, 2 candles later it’s at 143.60. I ended up stopping out. I re-shorted as it came under the VWAP but it reversed again, turning into another loss.

Preserving your Mental Capital

If you’re struggling to preserve your mental capital there are a few things you can do.

• If you’re up a dollar or 2, lower your stop to your buy price to minimize your risk. This way you don’t have to babysit the trade but move onto other plays.
• If your focus is off you can walk away for the day. Tomorrow is a new day.
• Narrow down your watchlist as much as possible to only the best plays.
• Have multiple screens so you can watch different stocks at the same time and not have to switch back and forth.
• If your risk is causing you stress it might be a sign that you’re trading too big.

Making the proper adjustments to preserve your mental capital is essential to long term profitability.

In the morning, I hunt for gappers in the premarket. For my mentorship group, I do a morning class before the market opens. We talk about stocks that had news out and some of these stocks had amazing plays right out of the open. $ORLY had an opening range breakdown. This had a $20 move and I’ve been fighting for pennies. $TSLA was another huge gapper with bad news. These stocks tend to have multiple moves throughout the day – the opening range breakout, the VWAP test at mid-morning, and then the fizzle into the close.

Always remember that there’s your financial capital and then there’s your mental capital. Don’t blow it all in the morning fighting with a stock that isn’t even ready, especially if you have other stocks on your watchlist. Keep multiple charts open and don’t get pigeonholed into one thing so that you’re forgetting the rest of your game plan. It’s ok to be trading NVDA but it’s not ok to miss other setups that are clean and perfect for big gains.

If you’re not sure of the setups and price patterns that we’re talking about you can learn them all here at our Bulls Bootcamp. It’s an intensive 60 day course to teach you exactly how I trade and why. To learn more or signup, email me at kunal@bullsonwallstreet.com today!

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NVDA

NVDA is an incredibly strong stock that had a great run after releasing strong earnings back in early May. After hitting resistance at $160, it sold off for four days in a row but stopped right above its previous $146 support level. Now this looked like it could either flush down lower or bounce hard here. Watching intraday, we saw a fake break of the support level. Once the stock reversed from a red to green move, we bought long at $146.20 with a stop underneath. We rode it back up and sold it off at $151 .

TSLA

Another great bounce play that was on our list was in TSLA. TSLA closed right at its 20EMA level after a hard flush in the last 2 days. With the moving average holding it up, we watched the stock in the morning looking for a red to green move or a bounce right at support. TSLA gapped up at the open and faded right to the previous day’s support level at $362.50. Once the pullback was sustained, we entered at $365.15 with a stop beneath the lows. We sold off our shares as we rode it up all the way to $371.18

If you’re not sure of the setups and price patterns that we’re talking about you can learn them all here at our Bulls Bootcamp. It’s an intensive 60 day course to teach you exactly how I trade and why. To learn more or signup, email me at kunal@bullsonwallstreet.com today!

The post Winning Reversal Trades appeared first on Bulls on Wall Street.

TSLA looking parabolic

On Tuesday June 8^th, I posted that $TSLA was beginning to look parabolic. That means that after a series of consecutive runs, a stock gets exhausted and is ready for a pullback. But the more extended a stock’s run, the more volatile a drop can get. $TSLA is no exception and after its run from $310 to $370 a hammer drop was ready.

Stalking $TSLA intraday, we saw that it was struggling to get above $376.75. Once the stock finally broke below this weak uptrend it was time to take a shot. I shorted $TSLA at $374.25 with a stop above the consolidation. Although it didn’t happen right away, I had the conviction to hold onto the trade. Finally, an hour later, $TSLA began to crumble. Only entering with just a couple hundred shares, my first cover was at $371.50. Then I covered 100 to 50 shares after every flush. With no end in sight, I rode it all the way down to $361 until finally closing his last 50 shares at around $355.50. That’s a total of $19 in gains, making this one of our best trades for the year!

If you’re not sure of the setups and price patterns that we’re talking about you can learn them all here at our Bulls Bootcamp. It’s an intensive 60 day course to teach you exactly how I trade and why. To learn more or signup, email me at kunal@bullsonwallstreet.com today!

The post How We Hammered The Parabolic TSLA Short appeared first on Bulls on Wall Street.

Whenever the market is choppy or bearish, I get a million questions about how I’m surviving.

“How much have you lost?”
“Have you blown up?”
“Did you get killed in the market today?”

The truth is, I thrive during market volatility! Today in particular, I made $5500 trading names such as $vblt $fit $nflx $tsla $ziop etc…

See, that’s what non-traders and struggling traders don’t understand: just because the market isn’t doing well, doesn’t mean you can’t make a ton of money. One of the great things about momentum day trading is you don’t have to ride the Dow into the ground like the big Wall Street funds; a good day trader is agile, taking advantage of whatever the current market environment is to make money. Make your money on what’s hot until it’s not – then move onto the next thing. It works equally well – sometimes even better – in a crashing market. Why? Because there is a ton of volatility, which day traders thrive on!

Now I know a lot of you are looking at all the red on your screen and doubting your future in the trading business. I used to be in the same position, stressing over what the talking heads on CNBC were saying and wondering how much money I’d lose when the $SPY took its next nosedive. But over time I developed a system to not just deal with market volatility, but to OWN it. While I like to post free content, like this video I just did on trading exhaustion gaps,

I really dig into my system in the 60 Day Trading Bootcamp. In the Bootcamp, I go over every single aspect of my trading system in live webinar sessions, then make sure you remember it all and learn how to actually apply it with homework, quizzes and a simulator. You’ll leave my classroom with the skills and confidence to tackle huge down days with a smile on your face and dollar signs in your eyes.

Of course, nothing beats learning live, right? If you’ve seen any of my photos, you know I play as hard as I work.

So you’ll be excited to know that you have TWO opportunities to see me in Las Vegas in the next two weeks!

The first event will be September 25th – 27th. Traders4ACause is a charity founded by Nate Michaud, AKA InvestorsLive, to raise money for several great causes. Once a year, Nate brings together a panel of awesome hosts (including yours truly!) to share their trading knowledge. You can learn more, and register, HERE.

After that, I’ll be speaking at the Trader and Investor summit, which runs from October 3rd – 5th. I’m thrilled to be included in this three day, info-packed event! I’ll be speaking alongside some great traders and educators, including host and founder Timothy Sykes. To learn more, or register, visit the Trading and Investor Summit page. 

Feel free to email me kunal@bullsonwallstreet.com if you have any questions. See you soon!

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In today’s video, we have an important discussion on position sizing versus risk using my current $TSLA entry. We also talk about gap downs to support versus orderly pullbacks.  I also analyze $SPY and focus list stocks $BABA, $GPRO, $GWPH, along with other stocks setting up.

My focus list is, market analysis and trade alerts are all featured in the Market Speculator Part-Time Swing Trade Report. If you would like to receive the swing trade report and alerts, sign up for the free trial. Follow me on twitter or email me at SinghJD1@aol.com

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