☕ A Tesla trading idea ahead of earnings

Good morning! 👋 

I’ve been up most of the night watching market chatter. 

Not that I’m worried, because I’m not. 

That’s just the way my mind works when I’m thinking about new trading and investing ideas. I find that the peace and quiet at 2 in the morning helps me process information while the phones, email and markets are quiet. 

Tesla’s very much on my mind, and we’ll get to that in a moment. 

Here’s my playbook. 

1 – Tech stocks selloff not even a blip on the radar

The tech selloff in recent days has left many wondering. 

Is this something to worry about or run of mill? 

I’m in the latter camp. 

“Not even a blip on the radar” to my way of thinking, in fact. 

Normally, I’d have a high-quality video clip for you from this morning’s discussion with Maria Bartiromo but thanks to a mystery update from Microsoft, my entire studio crashed and still isn’t working correctly. Doh! 🤦‍♂️

As much as I love tech, there are times when I really have come to hate it. 

You? 

2 – A Tesla trading idea ahead of earnings 

Tesla shares have been bouncing around for a while.  

The investor in me is perfectly content to accumulate ‘em because I think the stock triples in 3-5 years. I also think Musk is going to use the next update to finally pivot beyond vehicles and into AI. 

The trader in me is wondering about what happens more immediately (because everybody is still focused on EVs) and if there’s an opportunity. 

Here’s one way to break it down. 

Shares have risen from a low of ~$142 and are now chasing $190. I think they break $200 before long. That said, the 12-month average analyst target is $183.03 or a few bucks under where it’s trading now. 

Price is squarely in the center of an existing channel that’s bounded by $205.70 on the high side and $164.54 on the low side – a single standard deviation. That’s where the big money’ll play. 

The next estimated earnings date is July 19, 2024, so I’ll want to keep that in mind with a trade that takes me just beyond that window. 

Not surprisingly, open options interest for July 26th – one expiry further - is concentrated at $200 on the call side and $170 on the put side. That tells me I’m in the neighborhood. 

Seems to me a 1-2 punch is in order. 

Here’s the scenario. 

• There’s a high probability traders try to push prices above $200 before earnings by creating FOMO, then drop ‘em to clean out the weak money. That's what I’d do if I were a market maker or a hedgie because that would allow me to short/hedge shares in preparation for a downside reversal the investing public doesn’t expect. If so, buying $200 Puts while prices are moving up and through $200 when things get statistically stretched and everybody’s drooling could work nicely. Exit quickly using 5-10% target in a day or two. Reset, do it again. 
• At the same time, a few well placed (ahead of time) LowBall Orders to buy TSLA shares under $165 lays out the trap I want to spring at a price I’m prepared to pay. I’m an investor so even though we’re talking about trading, I do want to continue to build a position over time. So I’m inclined to do that now anyway. If I get my shares, I'll plan to begin selling at the money covered calls and repeat the process until my “trading” shares are called away and I lock in profits. My core position stays in place. 

Remember – learn to think like a shark, not a minnow! 

Note: People ask me frequently how I assess trading around core positions and the answer is like a boxer. The mistake most aspiring traders and investors make is thinking in terms of a single knockout blow. Stuff like this is more like boxing great Muhammed Ali’s “rope a dope.” 

Btw, if you are an investor and you’d like to learn how to make similar moves, I’m here. I’ll also be teaching/speaking at the October MoneyShow in Orlando, Florida if that’s of interest. Hope to see you there!

3 – Rivian: Das ist gut, aber nein danke 

The headlines are trumpeting Rivian’s deal as a $5B investment from VW. (Read) 

I think it just got the lifeline of the century. 

The deal will enable Rivian to carry the production ramp uo of smaller R2s in Illionois and the midsize EVs at a plant in Georgia while VW plays catch up. 

Rivian stock jumped 50% on the deal and I’d be inclined to take at least some money off the table if I owned it. (I don’t). 

Keith’s Investing Tip: I learned a long time ago that you never want to look a gift horse in the mouth when a deal like this shows up. The hullaballoo tends to wear off pretty quickly so booking at least some profits makes more sense then being greedy. Besides, if you really like Rivian and/or VW, the two companies could work together a long time so there’s no rush, a point I make often. 

4 – FedEx delivers but, 🤷 

FedEx put up strong Q4 numbers and provided strong full-year guidance. (Read) 

Shares have jumped premarket. 

That’s great but not enough to make me think about buying shares. 

The world is going digital.  

5 – A looming Florida real estate condo crush or new construction wave? 

I’ve long thought that the prospect of urban ghost towns is very real, albeit a very unpopular line of thinking. Most of the time, I’ve thought that we’d see ‘em emerge in placed like Las Vegas, Phoenix or other cities in the American Southwest where critical resources like water and power are running short. 

I’m starting to wrap my mind around older Florida condominiums which could be a special case all their own. The rumor mill is filled with reports of outrageous HOA assessments that aren’t just a few thousand dollars here and there but hundreds of thousands of dollars at a whack. 

Makes sense. 

Florida is getting super crowded as people move there at a time when insurance companies are increasingly prone to leaving the state. There's also loads of deferred maintenance that’s come to the forefront following the Champlain Towers collapse. 

The trick – if what I am hearing is accurate – is that a) some HOA rules stipulate that condo owners could lose their units via foreclosure if they fail to fork over the money and b) buyers may stay away or drive such a hard bargain that sellers could wind up at a loss. 

People will naturally gravitate to the word “crash” but I’m not sure that’s the right focus here. 

My mind is drifting towards the concept of land banking because I’m wondering if developers will go into high gear and buy out large swatches of prime land presently filled with older condos owned, in part, by folks who may just want “out” literally and figuratively over the next few years. 

If I’m right, that could actually presage another real estate run and a flurry of new construction, still higher values and – ta da – an entirely new crop of rebuilt, re-developed condos. 

Worth thinking about and if I can find a way in, probably investing, too. 

Bottom Line 

Time for a nap. 

And coffee. 

As always, let’s MAKE it a great day. 

You got this – I promise! 

Keith 😊 

PS: I’ve got executive presentations tomorrow and Friday so lets plan on taking a Five with Fitz breather. I’ll be in touch (briefly) if I can. OBAers – keep an eye on your email for our normal weekly update.