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Roughly One Third Of All Single Stock Buys From Small Traders Are Now For TSLA – Mike Swanson

By
Michael Swanson
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There was a very fascinating article in the Wall Street Journal this Sunday about what individual investors and traders have been doing this year during this stock market rally. It found that the masses have been selling out of stock ETF’s and funds this year. Much of that money has gone into bond funds. So, there is a big segment of individual investors that do not believe in the rally and are trying to cut back on their stock market exposure. At the same time, the article found that there is another segment that is taking on even bigger risks, by playing risky option trades.

Also, people have been rotating money into individual stocks. In one way this is smart, as the ETF’s SPY and QQQ are heavily weighted, and thereby being dragged down by market cap, stocks such as META, GOOG, and MSFT, which are under performing the market.

But, one wild fact is that almost one third of all single stock buys are for TSLA.

One stock!

According to the article, “For individuals, single-stock buying has been dominated by one market darling: Tesla. Over the past several weeks, Tesla has accounted for roughly a third of all single-stock net purchases by individual investors, Vanda found. David Jacobson, a 39-year-old high-school teacher in the suburbs of Chicago, said he bought Tesla shares for the first time in December, and he has gradually increased the position over the past few months. Before that, he was only invested in funds tied to indexes like the S&P 500 and Nasdaq Composite, he said.” 

TSLA remains the most owned stock on Robinhood and almost every single day is the most traded stock on Fidelity, but to think that almost one third of all single stock buy orders is for this one stock is nuts. Check out the TSLA chart.

Is TSLA a good buy?

There are other things worth buying.

Yes, it has rallied hard since the start of the year, but it is still trading below its 200-day moving average, while most stocks are now above that level, as the S&P 500 and Nasdaq are. This means that TSLA is a big laggard in the markets. Laggards tend to crash hard when the market has a mere pullback and then fail to rally back as much to take back its losses when the market rallies.

That’s what TSLA has done, as the relative strength ratio TSLA/SPX remains well below its November and September highs.

One is better to buy stocks or ETF’s that display strong relative strength towards the end of a market pullback.

When you do that you are more likely to buy into one of the next big winners.

That’s what happened with the GREK ETF in October, when the S&P 500 was making its last final lows of 2022 the GREK ETF displayed strong relative strength, going up in October while the US stock market averages continued lower.

CPI numbers are on tap today at 8:30 AM.

Some food for thought.

To get my morning market commentary sign up to my free email trading list here.

-Mike

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