In 2012, Elon Musk warned that anyone holding a stock position against his company (ie. ‘shorting’) would have a “tsunami of hurt” coming for them. Back then all the news flow was positive, and during the following year, Tesla’s stock price increased by 461%. Tesla (NASDAQ: TSLA) was enjoying a massive rise in price from its $25 per share IPO in 2010, up to more than $270 per share in June of 2015. Short sellers in 2012 thru 2014 were too early in their trades and got burned badly. I don’t know what system they use, but traders could’ve avoided losses by waiting for the right time to enter.
The news for Tesla recently has become more negative, and the stock has become a very popular short again. Articles are popping up all over the internet on why the company is in financial trouble (My favorite is here). Tesla is often now the most shorted stock in the entire market, with incredibly up to 30% of float being shorted.
The 10X rise in Tesla stock price, from its’ IPO until 2015, was tracked beautifully by my ‘Trend Exhaustion’ system. The trend came to an end in May of 2015, as shown in the clip below. The mighty uptrend was called to end by a monthly ‘Aggressive Sequential’ signal (see cell BJ68).
(Click on image to enlarge)
Traders should’ve entered a short position during June of 2015 as Tesla was making its all-time high. Since then, the stock has fallen nearly 20%, and may not be done.
This spreadsheet is for sale as the Trend Exhaustion Market Timing Excel Spreadsheet.
In this overvalued market there are more opportunities to short than go long. If you believe we’re at the end of this extended bull market, then shorting “story” stocks such as Tesla can be very profitable.