THIS IS NOT A TIP OR RECOMMENDATION. I AM NOT A TIPSTER. PLEASE DO YOUR OWN RESEARCH. PLEASE READ THE DISCLAIMER ON THE HOME PAGE OF MY WEBSITE. IF YOU COPY MY TRADES, YOU WILL PROBABLY LOSE MONEY. SHORTING INDIVIDUAL STOCKS IS VERY HIGH RISK.
You may have spotted that I Shorted Tesla TSLA via a Spreadbet yesterday at 22537 ($225.37) - please see my ‘Trades’ page for specific Trade details. This won’t be a long blog, I just wanted to outline the main reasons for my Short and a few other points worth noting.
The ‘Sell’ case:
Understanding the Spreadbet Exposure
A mate DM’d me on Twitter about how you work out the Exposure on this bet - it can be a little confusing, so I thought it would be worth clarifying here for Readers.
As with any Spreadbet, the easiest way to think about it is to imagine what your Exposure would be if you bet ‘£1 a Point’ on it. In the case of my Bet, at 22537 (this would be $225.37 in the ‘real’ market), if you bet at £1 a Point then the Exposure would be £22,537.
The Minimum Bet Level on igIndex is ‘£0.1 per Point’ - so this would be equivalent to Exposure of £2,253.
As another example, if you did ‘£8 a Point’ then your Exposure would be £180,296 (£8 times 22537).
If you did ‘£0.4 per Point’ then your Exposure would be £9,014.
The Margin (or Deposit if you like) requirement is 10% of Exposure - so on my last example, the Margin would be £901. As a ‘Top Tip’, when you enter your details of a Trade into the Dealing Screen on the App (I never use the Laptop method so not sure if this is similar - but it probably is), it will tell you (in admittedly crazy tiny writing) exactly what the Margin requirement is - if you see this figure is huge, then you have probably misunderstood how the Exposure is calculated - CANCEL THE DEAL IMMEDIATELY AND WORK OUT WHERE YOU HAVE GOT IT WRONG !!!
If you regularly keep up with my scribblings, you will probably know that I have been itching to Short TSLA for ages but the Charts were not giving me a decent enough ‘Sell Signal’ to put the Trade on. However, with the Brexit Fears spooking the Markets in recent days, the Price looks to be coming off and I thought it was time to get a Position initiated.
Let’s kick off with the Longer Term View (always Best Practice with Charting) and look at my Screenshot from ShareScope below which goes back 3 Years ish. It is clear that for all of 2013 and much of 2014, TSLA was in a strong Uptrend but since that it has done wide swings in a sort-of Sideways fashion - it is very messy really.
Note the Peak at $290 and a Breakout above this would have me activating a ‘Stoploss’ and closing my Position at a Loss and you should be able to see other Peaks that will be strong Resistance.
Note how the 200 Day Moving Average (which is the Light Blue Wavy Line - not the ‘fast’ one, the ‘slow’ one) went Up strongly for half the Chart and since that it has levelled off and gone Sideways really - again the 200 Day MA is showing us the Trend even if we are unable to draw the Channels on the Price Line.
My Yellow Circle is highlighting where the 50 Day Moving Average has crossed the 200 Day Moving Average from underneath and done a Bullish ‘Golden Cross’ - being an Evil Shorter, this is not something I want to see but I suspect we will get a ‘Dead Cross’ soon.
My Chart below zooms in to show the Daily Candles over 2016 so far and a bit of last Year. My Green Arrow is pointing to a lovely ‘Inverted Hammer’ Candle which was generated on Wednesday 8th June 2016 and in the context of a Run-up for about 3 Weeks, this looked like a great Sell Signal.
On the next day we got a Big Down Candle which ‘Confirmed’ the Inverted Hammer - so it was game on for the Short and that is pretty much why I banged it on.
In terms of Targets, I expect it could fall to $205 or maybe $200 which would be a psychological Support Level where Buyers might come in. I will play it by ear but chances are I will close this Position around the time of the Brexit Vote and just grab a small Profit out of it and I will be looking to Short TSLA again in the future - as it is unbelievably over-valued.
I am happy to let this Bet run as it may take some time for it to play out as I would like - over valued ‘Story’ Stocks can stay that way for ages and keep going up even though the whole thing is clearly daft. However, there is a very Strong Resistance Level up near $290 (i.e. 29000 on the Spreadbets) and it is only if it goes over this level that I would get worried and Close out the Short - so that is where my Stoploss is.
However, if the Trade does go against me (so far it is doing very nicely !!) then I am happy to add a little more Short and in effect ‘Average Down’ (although of course I will be ‘Averaging Up’ because this is a Short). I currently have about 1% of Portfolio Value in the Position and I am happy to double this if I need to - but any Shorts on Individual Stocks are High Risk and I will not get carried away and do a Big Position. .
However, I will most likely not treat this as a Long Term thing and I will be tactical and short termist if a reasonable Profit arises in coming Weeks - with Markets likely to be pretty rough around the Brexit Vote, then I might be able to sneak out with a nice quick Profit and I can then play the same Trick again in the future - TSLA is clearly a joke but it will take quite a while for reality to hit the gullible masses. Elon is God and that is it as far as they are concerned.
Something that could derail me is when they actually open the new Battery ‘Giga-Factory’ - this might cause the Price to Spike up but to an extent it is probably priced in already and I doubt it would go over $290 in any event. Of course, a big advantage of Shorting over-valued stuff like this is that there is no Dividend for me to pay and very little chance of it being taken-over, which can be a Killer if you are Short on a Stock.
Anyway, it would be nice if I can snaffle some Dosh out of this Hyped-up Bubble Stock. In part I am doing this for a bit of ‘fun’ and to nab some Beer Money out of the Market and pickpocket old Musky.
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