Tag Archives: Short

Did Elon Musk, Founder of Tesla, Get the Last Laugh? Maybe! The Short Squeeze

Elon Musk, Tesla founder and SpaceX Explorer garnered our attention with several interesting charts which we highlighted here and here on how he brought the electric car to fruition.

Musk, so controversial, not only in his endeavors, but in his life, went against the grain with his Tesla Automotive, giving rise to the first all electric vehicle (also in very lofty production goals, which were at first not met) and a unique against the grain sale system that bypassed much of the standard mandatory current automobile industry taxes tariffs and payments.

Musk, during a Twitter barrage about a year ago, got himself into trouble resulting in his removal from several important roles at his firm Tesla.

Much of the Twitter trouble came from an attempt to chase short sellers – those investors that actually sell your company stock short (in advance) with the expectation that it will go down there by purchasing it back at a profit. Musk taking issue with the vast community of shorts in a Twitter storm created interest from the regulators.

Five Years of Short Interest

Fast forward to just last week,  neat chart from our new test service, shows exactly what happens when too many people get on one side of the trade and what it can do to the stock.

As, the graph rises, more shorts are piling on … but what happens if they all need to hit the exits at the same time?

2-7-20 Tesla Short Interest

This is What happens, AKA Short Squeeze

While the stock has come back down to earth a bit at the end of last week, there were certainly many investment bodies left behind on the short squeeze roller!

2-7-20 Tesla Graph

We are not recommending Tesla as an investment, or as a purchase for your next car, only somewhat humored by the Lemming like pilings on and off, and what it has ultimately done to Tesla stock.

Did Elon Musk Win? Time will tell!

Have a Happy “No Lemming” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents

Short Covering Rally or Keyser Soze Perpetual Motion

Short covering rallys are similar to perpetual motion, as they are known and can be described, but no one REALLY knows for certain their existence.  The good news is that just as perpetual motion can be described, so can a short covering rally.

Here is our definition of a short covering rally:

    • Non-Technical – Like a table of mouse traps with table tennis balls on them, one trips and the others all begin to fire off, causing a sudden feverish collective effort.
    • Technical – Negative sentiment becomes so great, investors who have sold short positions begin buying with aggression, moving prices much higher.

Mouse Traps and Ping Pong Balls Explain Nuclear Fission Gif - Mouse Traps and Ping Pong Balls Explain Nuclear Fission
see more Gifs

Short Covering Characteristics:

  • GIANT move up in the markets
  • Little or no exact reason for the sudden caving and purchase by the negative bears
  • Low volume for such a dramatic move on the capital indexes
  • Excitement swells and headlines turn positive
  • Immediate fatigue by capital markets can often be spotted i.e. They don’t last long

In Keyser Soze like fashion we may never know if they existed or not.  Was yesterdays market move a short covering rally? Only Soze knows!

Have a great day!

JK

PS – Interesting update, Janet Yellen last at the Boston Economic Club, gave a very “open the door” speech to more Fed intervention, i.e. QE and the capital markets, which would normally be excited, seem to be yawning!

214-706-4300   www.jkfinancialinc.com