Doubled short position on TSLA and made a tighter stop loss.

Hi everyone. I doubled my short position on TSLA at 450 today. My original stop loss on the 487 short was at 600, but moved the overall stop to 550 now, with a mental stop at the previous highs near 500. The overall risk on the trade is still the same or less than before.

If TSLA hits the maximum stop, it’s a 1.5% loss, while if I stop myself out a bit earlier near previous highs, it’s a loss of .5% to my account. 

I think there’s a good chance that TSLA powers upwards until Battery day on 9/22/2020, but the risk/reward to the downside is too juicy to pass up on for this trade. The trade idea fails if or when TSLA breaks to new highs, so that is when I will close the short position. I’m looking for a quick continuation of the downtrend here, so if it doesn’t happen within 2-3 weeks, I will exit the trade. 

TSLA Daily Pyramiding 9_15_2020

Have a nice rest of the week!

 

9/13/2020 Stocks down a little this week, with technology stocks leading the underperformance again. Still short TSLA and AAPL, and thinking the market moves lower from here in the next 1-2 months.

Hi everyone, welcome back.

Stocks moved a bit lower this week mostly due to technology stocks / QQQ selling off. Although futures indicate a fairly large gap up, I think we will move lower again this week simply because the momentum has shifted. As a result, I am still short TSLA and AAPL.

Below is a weekly chart of SPY. Notice how the RSI went down while we made new highs. This suggests a momentum overshoot and we are bound for lower prices ahead. I think we retest the high 290s (~10% lower) within the next 4-6 weeks.

SPY weekly 9_13_2020

Enjoy your week! I’ll keep you posted if I decide to scale in or out of any trades. I am considering adding more to my MRO position, but will probably wait until we get a retest of the lows.

 

9/7/2020 Stocks drop a little this week and I think we continue lower next week. I’m up a lot on my TSLA and AAPL short, although I only took a half-sized position.

Hello, I hope you all are having a great Labor day.

Last week I shorted TSLA at 487 and AAPL at 130.8. My original plan was to use a much larger position size and hedge by going long QQQ. However, since the stocks gapped up, I was scared and instead took a half-sized position and didn’t hedge with QQQ. You can see my original thoughts and trade ideas in last week’s posts. 

I’ve been looking at pyramiding into these trades – meaning I add more to the position and lower my stop down to keep the risk the same as before.

I’m still looking for the ~60% correction (target near 200) in TSLA. If I do pyramid in, I will be doing so on a rally upwards and lowering my stop to near all time highs for these two stocks. 

Daily chart of TSLA below:

TSLA daily 9_7_2020

Daily chart of AAPL below:

AAPL daily 9_7_2020

On a final note for the broad market, I expect volatility to be drastically increasing over the coming weeks. 

8/31/2020 Shorted AAPL at 130.8 and TSLA at 487. Decided not to hedge with QQQ and took a smaller position instead.

Hi everyone. I decided to short AAPL at 130.8 and TSLA at 487. I picked the price based off when I woke up today (just now at 11:40 AM mountain time).

My original plan was to hedge the short position with QQQ, but the upward move today made me very uncomfortable, so I decided to use a half position size on my AAPL and TSLA short.

My stop loss and profit exit are still the same – I will risk roughly 2% of my entire account in an attempt to make 6% (instead of the original risk 4% to make 12%). Since this sizing is a bit smaller, I could turn my AAPL short into a covered short by selling puts. 

Have a great Monday!

8/30/2020 Stocks up a decent amount again this week. I will be shorting TSLA and AAPL sometime tomorrow and will hedge by going long QQQ. I will make a post when I take the trade.

Hi everyone, welcome back!

Markets are constantly going higher and higher each week, but I think it’s a good opportunity to go short now. Risk reward favors a move to the downside, and I will short TSLA and AAPL tomorrow and hedge by going long QQQ. 

My AAPL short target is ~325 and short target for TSLA is 900-1000. These will probably be holds for at least 3 – 6 months. My stop loss will be at about 560 for AAPL (risk $60 per share) and 2600 for TSLA (risk $400 per share). 

Of course, since these two stocks will have their prices lowered due to the stock split, these numbers will be adjusted accordingly. Overall, I plan to risk no more than 4% of my total account on these two positions. I am also thinking about turning the position into a covered short if specific scenarios arise.

Weekly charts of AAPL and TSLA below:

AAPL Weekly 8_30_2020

TSLA Weekly 8_30_2020

Of course, my maximum loss will be based off of my hedge with QQQ. For example, if TSLA drops 20%, but my hedged QQQ (the ETF I go long) drops 40%, I will be be stopped out because I lost 20% (~400 stop loss / 2200 entry). 

To summarize, I’m risking no more than 4% of my entire account on this trade in an attempt to make 12%. The trade profits when TSLA and AAPL underperform QQQ, and loses when TSLA and AAPL continue to outperform the QQQ. 

Enjoy your week, and I hope all is well!

8/23/2020 Stocks up slightly this week while QQQ continues to shine. Thinking about starting a small short position on Tesla.

Hi everyone, I hope you had a nice week.

Stocks are up a little this week, with QQQ / technology stocks leading the way again. I’m thinking about starting a small short position on Tesla or the market in general. 

Here’s the daily chart of Tesla (TSLA) below. I would probably hedge my bet by going long QQQ as a hedge. 

TSLA daily 8_23_2020

SPY daily chart below. I’ve been mentioning the bearish RSI divergence for multiple weeks now. 

SPY daily 8_23_2020

An update on my positions – I’m still long MRO (up quite a bit), long XLF and short SPY in a pairs trade (down a little -> ~ .5% of my account), and looking at the INO/NVAX pair (long INO, Short NVAX).  Thanks for reading! 

8/16/2020 Stocks mostly flat this week, and it looks like we will continue higher in the short term. I’m still not buying at these levels. Looking at an INO/NVAX pairs trade.

Hi everyone, welcome back. I hope you had a nice weekend!

Daily chart of SPY below. I still think we move lower in the medium to long term, but will probably continue higher in the short term. As a result, I am still not buying the index here for a long term hold. 

SPY weekly 8_16_2020

A trade that I have been looking at is the long INO, short NVAX trade. They are highly correlated stocks since they both make vaccines for Coronavirus. The trade idea is that since the spread between the two has widened a lot (~ 2 standard deviations from the mean), going long INO, and simulataneously going short NVAX for a 3 month hold before earnings seems reasonable. 

My position size if I take the trade would be very very small, and I would place a 25% stop loss on the trade. In other words, if the spread between them widens an additional 25% (drops to a ratio of .075), I would get stopped out. Since I only want to risk 1% of my account, I will only use 4% of my account on this trade.

I plan to take profits within 3 months (right before earnings) or if the ratio between them goes to .20. It’s a 25% stop loss and 100% profit exit, so the risk reward is roughly 4:1. 

Weekly chart of the ratio between INO and NVAX below:

INO_NVAX Weekly 8_16_2020

Daily charts of INO and NVAX below:

Ino daily chart below:

INO daily 8_16_2020

NVAX daily chart below:

NVAX daily 8_16_2020

I hope you all have a wonderful week! 

8/9/2020 Stocks continue higher surpringly and nears all time highs, but I’m not bullish medium/long term yet. I think SPY will break out to all time highs, but then have a substantial pullback (~20%).

Hi everyone, welcome back. I hope you had a nice weekend!

We will probably move quite a bit higher above all-time highs in the short term due to the upwards momentum, but then break lower. I still think we head towards the low 270 range once technology stocks pull back.

Also note the large weekly RSI divergence in the weekly chart of SPY below. 

SPY weekly 8_9_2020

I’ll keep you posted with a mid-week update if anything interesting develops.

I always remind myself that it’s better to be patient and not lose money, then to lose a lot of money buying at the wrong time. 

 

8/1/2020 Stocks up a little this week, but QQQ rises after strong earnings from the big tech companies. Still not convinced this is the next leg up – I think we move lower.

Hi everyone, welcome back to the blog!

I think the S&P500 will still retest the low 270s to 280 level, which is about 15% lower from here. From a risk/reward standpoint, I think it’s equally likely we move up 15% or down 15% from here, meaning the risk/reward ratio is only 1:1. I would need to believe that it’s just as likely for the index to move up 30% as it is to drop 15% (risk/reward of 2:1) for me to consider buying the index here. 

Here are 3 reasons for why I think we move lower:

  1. Most of the market gains are still led by technology stocks, namely the FAAMG stocks (Facebook, Amazon, Apple, Microsoft, and Google). If and when these companies sell off, the whole market will get dragged significantly lower.
  2. Momentum is waning, as you can tell from the bearish RSI divergence (same or higher price high, but same or lower RSI reading). 
  3. Markets are very expensive from a historical standpoint if you look at the P/E ratio and Market Cap to GDP ratio. 

However, 3 reasons why we might not move lower are:

  1. The market has mostly stopped reacting negatively to coronavirus news (reacts positively though). 
  2. The Fed continues to pump liquidity into the market.
  3. Sentiment is still extremely bearish (~20% bullish, ~50% bearish, 30% neutral), meaning there is likely a lot of sideline cash waiting to buy dips. This usually means we will continue to move higher, at least in the short term, unless something unexpected happens (which will probably be non-coronavirus related). 

Let’s look at the daily charts of SPY and QQQ. 

SPY daily 8_1_2020

The QQQ is also building up a bearish RSI divergence, but is holding up quite strong near all-time highs. Daily chart below:

QQQ daily 8_1_2020

Thanks for reading and enjoy the rest of your weekend! 

 

7/26/2020 Stocks flat this week as technology begins to underperform the broader markets. Short term momentum still up, but I think we start moving lower in the short term now too.

Hi everyone, welcome back. Stocks didn’t move much this week, so we will look at SPY and QQQ and then call it a day. 

Last week I thought we would continue moving higher until something more drastic changed. I think the charts are telling us that the character has shifted from being near-term bullish to near term bearish.

Over the last month, SPY would normally close the week strong, but we got 2 consecutive down days to close the week this time. A large part of this downmove is due to the weakness in the technology sector. There’s also the bearish RSI divergence, hinting that the upward momentum is weakening. 

SPY daily chart below, notice the bearish RSI divergence (higher high, but lower RSI reading). 

SPY daily 7_26_2020

QQQ (tech heavy ETF) daily chart below:

I think we will move to the high 230s rather quickly before we get a strong reaction. The move would put QQQ roughly 6% lower. However, notice how the last 2 times QQQ reached an RSI near 50, it recovered. I suspect this time will be different, but we will see. 

QQQ Daily 7_26_2020

Enjoy the rest of your weekend, and I will see you next weekend like usual!