While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.Read more
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As Tesla (TSLA) pushes above and beyond $1,000, let’s remind readers why this tech stock is so brilliant and why it outperforms even amid a backdrop of haters that taint the stock on a daily basis.
No doubt that Tesla has benefited from the “re-open trade” with risk-on sentiment mesmerizing equity markets amid positive data points that reignited Tesla with vehicle sales in China.
Then there is the rampant speculation taking place buoyed by the Fed pouring trillions into the capital markets.
The outcome is tech stocks leading the way with many reaching all-time highs.
Specifically, for Tesla, a sanguine optimism is coalescing around the popularity of Teslas in China.
Tesla seems to have triumphed over the pandemic with a momentous “snapback” in demand for Model 3s in China.
Tesla delivered 11,000 Model 3 vehicles to Chinese customers in May, which is 7,000 more Teslas sold in China than April.
The telltale signs are there hinting this is the beginning of a voracious ramp-up in Tesla sales not only in China but throughout the Asian regions, including Southeast Asia.
The bumper sales seen in Tesla’s China numbers coincide with the building of their monster battery factory in Shanghai, coined Giga 3.
The news in China dovetails nicely with Tesla’s commitment to deliver more than half a million vehicles this year, which has raised some eyebrows on Wall Street.
One persisting issue remains – margins.
Musk has slashed prices on Models S, X, and 3, decreasing the marginal profit on these models ahead of the Model Y cannibalizing them.
Tesla’s bestselling car Model Y avoided a price cut.
Some of the premium add-ons have been upped in price to compensate price cuts such as Full Self Driving (FSD) increasing by $1,000 to penalize customers who desire more personalization.
An unfortunate headwind caused by the pandemic is that Tesla ended Q1 with bloated inventory because the supply chain was crippled by a delivery bottleneck and factory stoppages.
When Tesla drops prices, it harms legacy car companies far more because it raises the competition bar in EVs creating an environment where it will be awfully hard for legacy car companies to ever outdo Tesla with an inferior product.
For example, GM burns through $7,000 per Chevy Bolt sold at a time when the industry is forced to go all-electric as the pandemic effectively pulls forward EV demand to today.
Tesla’s headstart on the traditional car circuit is giving them ample time to turn the screws on them hoping a few of them drop like flies before they can ever get close to becoming competitive.
Eventually, gas guzzlers will be banned by governments and EVs will be universal.
Tesla is in a golden position to produce the optimal EV while tirelessly working to make them cost-effective for buyers in a lower income bracket.
I believe that Tesla will mix and match premium and basic models to cater to every price point so that every buyer will gravitate towards Tesla.
Musk keeps pushing the envelope with new divisions as well.
He continues his vision uninterrupted by proclaiming that the company's Nevada factory would likely produce the new semi-truck's battery and powertrain, with the remaining work done in other locations around the country.
“It's time to go all out and bring the Tesla Semi to volume production," Musk said.
The semi-truck is planned to price at around $150,000 for the 300-mile model and around $180,000 for the longer 500-mile model.
This division could grow into a $3-5 billion revenue driver in the next few years.
This is yet another example of Musk staying one step ahead of the traditional carmakers.
To understand more about the Tesla semi-truck, click here.
Another project Musk is working on is the Blade Runner influenced cyber-truck.
The cyber-truck is a consumer truck that Musk is working on that he tested out with TV comedian Jay Leno.
The future has never looked brighter for Musk and Tesla as the demand of the future has repurposed itself to today and only Musk can deliver on such high expectations.
Do not day trade this stock because the volatility will blow investors up. This is a buy and hold long term story.
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“Land on Mars, a round-trip ticket - half a million dollars. It can be done.” – Said Founder and CEO of Tesla Elon Musk
https://www.madhedgefundtrader.com/wp-content/uploads/2020/06/elon.png138122Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2020-06-12 09:00:102020-06-12 09:57:26June 12, 2020 - Quote of the Day
This was a top you could see coming a mile off. Now, the correction for the greatest rally in stock market history has begun. Will it be the greatest correction in history?
It could be.
It was the awful news that the Coronavirus is starting to run away again that started the panic. New cases in Texas and Arizona are growing so fast that the local hospital systems are getting overwhelmed once again. The Armageddon scenario is back on the table once again.
You knew we were in trouble when the stocks of bankrupt companies, like Hertz (HTZ) and JC Penny (JCP) started doubling in a day, even though they have no equity value whatsoever. They were bid up simply because they had low single-digit prices, as bankrupt companies always do.
They were bid up by greater fools and the market just ran out of them.
It wasn’t just equities that got slammed. Oil (USO) suffered a horrific day, down 8.2%. because of burgeoning inventories leftover from a dead-in-the water economy. Bonds rocketed three points and are up an eye-popping 11 points from last week. Even gold (GLD) failed to move, held back by widespread margin calls.
It seems we have returned to the terrors of February-March, the down 2,000 points a day kind. There was barely a rally all day. It basically went straight down. How much more is there to go? Let’s look at the obvious targets in the S&P 500 (SPY) and the distance from the Monday top.
$299 – Down 7.7% from the top – the 200-day moving average and top of the April - May double top
$288.74 – Down 10.9% - The 50-day moving average
$272 – Down 15% - bottom of the April - May double bottom
$262 – Dow 19.4% - Top of the initial rally off the March 23 bottom and the level where a new bear market is declared. Two bear markets in two quarters?
$219 – Down 32.6% - the March 23 low gets retested.
There is quite a lot to chew on here. In the end, it will depend on how much the first Corona wave ramps up after a far too early re-opening. Even if there are no further shutdowns of the economy, a world where consumers are too afraid to leave their homes doesn’t generate a lot of growth or earnings.
When the president says things are great, but you see 5% of normal traffic in the local shopping mall, you want to run a mile.
Forget about the second wave, we haven’t even gotten out of the first wave yet. Corona deaths topped 114,000 today. We could hit 250,000 by August, not a great mall traffic generator.
If the selloff continues, and it probably will until the Q2 earnings are published starting in mid-July, then this is the dip you want to buy. For if the lows hold, we will be at the beginning of a 400% move in the main indexes over the next decade.
To get the depth of the argument why this will happen, please read about the coming Roaring Twenties and the next American Golden Age by clicking here.
Here is what you want to do on this move down:
*Stocks - buy big dips
*Bonds – sell rallies aggressively
*Commodities - buy dips
*Currencies - sell US dollar rallies
*Precious Metals – buy dips
*Energy – stand aside
*Volatility - sell short over $50
*Real Estate – buy dips
And buy LEAPS (Long Term Equity Anticipation Securities), lots of LEAPS. This is where traders have been picking up 500%-1,000% returns this year.
Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
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When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.Read more
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With the sell off today and the fact that I suggested short dated options on the MKC trade, I am going to suggest you close the position and recoup some cash.
Here is how you close the trade on MKC.
Sell to Close June 19th - $175.00 call @ 1.50
Buy to Close June 19th - $180.00 call @ $.40
The credit will be $1.10 per spread. With a small allocation when I suggested the trade, the cash loss is limited to $160 if you traded the suggested 4 lot.
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