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In a prescient post last week (Could Tesla Be Bottoming?), The Market Ear noted things could get exciting for Tesla, Inc. (NASDAQ:TSLA) shares in the short term if the stock broke through resistance:
Tesla's Short Term Set Up
The short term chart is showing some sort of inverse head and shoulder formation having formed over the past few months. $190/195 is resistance area. A close above it and things could get short term "dynamic". Note the 50 day has flipped to sloping positive and could be crossing above the 100 day soon.
Source: Refinitiv
The Market Ear did note that the long term trend for Tesla remained negative, with the stock needing to break through $220 to invalidate that, but given how strongly Tesla broke though the $190-$195 resistance level, it seemed on Monday that Tesla shares could break through $220 soon too. Intraday Monday, Tesla shares broke above $213, before closing at $209.86. They broke through $230 intraday Tuesday.
A (False) Rumor Of Record Sales In China
We wondered to what extent Monday's move in Tesla shares was due to posts like this one saying that Tesla sales in China hit a record in June.
Apparently, the "new high" claim was originally included in a previous version of this Weibo post by Tesla China, but subsequently removed.
If true, this would have been especially impressive, given the current EV competition in China, including a new entrant, Xiaomi (OTC:XIACY), which is sort of like China's version of Apple.
As it turned out though, Tesla sales were actually down 24.2% year-over-year in China in June. But deliveries overall were better than expected.
Our Tesla Trade
In early April, we opened trades on three beaten-down EVs, one of which was Tesla.
Our Tesla trade was a vertical spread expiring on January 17th, buying the $200 strike calls and selling the $205 calls for a net debit of $1.63. We got filled on that trade at $1.63. Since the maximum gain on this trade occurs when the stock is over $205, this trade is on track for its maximum gain.
Another Trade On Track For A ~200% Gain
In a post last week (Another Trade On Track For A ~200% Gain), we mentioned that our Carvana, Co. (NYSE:CVNA) and SalesForce, Inc. (NYSE:CRM) trades were on track for 200% gains.
Remember, the way call spreads like our Tesla trade work, your maximum gain is the distance between the strikes (in this case, $5). Since $5 represents a ~207% gain from our entry point of $1.63, this is a third recent trade of ours on track for a ~200% gain. We just need the stock to be trading at $205 or higher in January (if we exited now, we'd be looking at something closer to a 70% gain).
If you want a heads up when we place our next trade, feel free to subscribe to our trading Substack/occasional email list below.
If you'd like to stay in touch
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This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.
