I love this analyst's reasons for shorting Tesla shares
This is a stock market story but it speaks to truisms about trading in general. Michael Purves, chief global strategist and head of equity derivatives research at Weeden & Co, made a call to short electric carmaker Tesla today and gave 4 reasons.
“The stock has become so divorced from fundamentals that the primary discussion needs to focus on technical analysis – which is now suggesting this year’s rally is coming to an end,” Mr. Purves says, “and that momentum is more likely exposed to the downside. While the broader tape has been bullish, this stock can drop quickly.”
All four reasons are technical and include a broken uptrend, a head & shoulders, falling volume on rallies and the RSI.
In a parabolic market you should throw all the fundamentals out the window. But you should throw most of the technicals out the window as well. A market that goes parabolic is a special kind of beast, you just want to jump on and hang on for as long as you can.
Tesla shares
As an aside, I was long TSLA at the start of this chart. I bought at $21, sold at $30 and thought I was a genius.
Update: Full credit to that analyst. Shares of Tesla fell all the way to $120 where they found support at the 50% retracement before going on another run to $265.
