As you know I shorted TSLA a few months ago when it was above $330. It became clear to me that its debts were only piling up, the story was looking bad, and the stock was due to sag as it blows its balance sheet up even more.
And you know what happened next.
Musk blew off an analyst on earnings call refusing to answer key questions and so the stock dumped.
A lot of people then got on the short wagon even though many true believers in Musk simply bought more.
Musk is a master of using the media and putting out meaningless hype stories to pump his stock.
So this week he said he might do a Tesla truck one day on Twitter and the stock went up over 5% in one day.
So what has happened to me?
If you are in my private Power Investor group you know I got out of my short position when TSLA pushed through the $310 level at the start of this month.
As you can see from this chart that move cleared it’s March and April resistance $310 pivot point.
I think this bounce is starting to run it’s course as Tesla is running into key resistance in the $370 level.
What is more Musk has been predicting that he will be able to produce 5,000 Model 3 Tesla cars this month so that he will make enough revenue that he won’t have to borrow more billions to just stay in business.
The thing is just the other week he claimed that a Tesla employee conspiracy is operating at his car plant to sabatoge him.
So he has set the stage to dissapoint when he reveals his real June car production next week.
And the news is just getting weirder on it.
Tesla is sending out e-mails to all Model 3 reservation holders in North America this week informing them that their electric sedans are ready to order and asking for an additional $2,500 to fulfill their orders.
Tesla ended the first quarter with a cash balance of $2.7 billion. It said then that it still expects to spend $3 billion. Deposits for Model 3 vehicles would give Tesla some of the cash that it needs without having to further dilute earnings through stock sales or by issuing debt.
Would-be Model 3 owners already put down a $1,000 refundable deposit to “reserve” one of Tesla’s Model 3s. Those reservation holders must pay an additional $2,500 to turn their reservations into an order, at which point the original $1,000 deposit goes toward the overall payment for the car.
I’m sure there some pissed off recipients of that email.
The drama will be intense.
But this is a market now where I think pair trading where you go long some stocks and bet against some bad ones makes sense in an overall sideways summer market.
Yesterday I talked with Matt Morris, who is a specialist in long trading of micro-cap stocks, on what he looks for to find stocks before they have a nice boost up.
To listen to that interview go here.