I continue to like $TSLA for the following reasons:
1) Fundamentals – The company has strong sales growth and its earnings are projected to grow +53% in 2014 and +166% in 2015. I wouldn’t be surprised to see these estimates raised as they continue to expand internationally and add new models.
2) Technicals – The chart is showing VERY strong technicals on multiple timeframes, with many key areas of institutional support. Also, it looks like the stock is potentially working on the right side of a new base.
3) Option activity – I noticed recent bullish option activity, especially over some near-term call strikes.
4) High short interest – The stock remains highly shorted, mainly due to valuation concerns. Remember, you can’t use traditional valuation metrics to value companies that are revolutionizing the way we do things. I wouldn’t be surprised to see a short squeeze over the next few months.
5) Comparisons to GM – Although history doesn’t always repeat itself, it tends to rhyme. General Motors had an explosive move from 1913-1915. Tesla’s chart has a very similar pattern so far, and has more potential upside based on the GM precedent.
In interest of full disclosure, I currently own a position in TSLA for my clients. Of course, if any position turns against me, I always use stops to protect the downside. If you take a position, I recommend doing the same. I can’t tell you where to put your stop because I don’t know the readers timeframe. Besides idea generation, the main purpose of this blog post is to show you how I combine AS MANY FACTORS as possible to help increase my probabilities of a trade working out. Good luck!
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