This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.
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It Is Now Crystal Clear Why The Stock Market Is Falling
It has been another wild day on Wallstreet, and it is now crystal clear what is going on. This isn’t about trade wars, it isn’t about the Fed, it is a technology-led sell-off of companies that appear to carry stretched valuations. But suddenly signs of separation began to emerge, along with signs of a bottoming for the broader market are being put into place.
We can start with the lead culprit, Facebook, which was up today. We can see that Facebook broke its intraday downtrend the other day and then retested all day yesterday. The fact that the downtrend broke, and support around $148-149 has held gives me hope the stock can begin to rebound. The first stop should it rebound is around $166.
We can see a similar type of pattern in shares of Alphabet, which also managed to finish flat, but hold the $1000 level.
We can see in the chart, the same downtrend was broken, and a retest of that downtrend.
The Technology ETF, XLK, didn’t break a downtrend, but it has continued to hold support and its long-term uptrend.
Nvidia shares are also holding support above $218.
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Micron is trying to hold the base of the gap at $52.25. It needs to hold, or we are looking at $49.
I have been saying I thought Netflix would go to $295, and it did, and then it went straight to the next level at $287 and held.
Tesla shares have been crushed, falling to $257! Once the stock broke $290, that was it. You can see it tested $290, tried to get above $303, and failed, and went straight down from their. Meanwhile, the Bloomberg Model 3 Tracker is now trending at 2,000 cars per week. The bears are cheering victory, because they have been right for two days, after being wrong for nearly four years.
I’m going to try to be as dipolamatic with this as I can be. I have many times shown how Tesla Model S&X demand has been far better than the competition. To this point I see no evidence to suggest the demand has fallen. The delivery reports quarterly, the blogs I read, or the check of the local Tesla dealer. In fact, at least where I live, I still see more Tesla’s on the road, and based on my observations, they have been replacing the other higher end cars.
In term’s of Tesla liquidity, I always knew there was a risk at some point in 2018; Tesla might need to raise capital again. But concerning Tesla going bankrupt in “months” seems far-fetched in my opinion. As my old boss used to say to me: “All you need to do is a push a button, the capital markets are open for business.” And the markets are open for business, and Tesla can access that capital market any time they need. There plenty of underwriter that would likely love to be lead left on the cover too. Could Tesla come to market tomorrow and do a $3 billion equity deal, probably. That is why Tesla is a called a “growth” company, they invest heavily in capex and R&D.
Could I be dead wrong, and Tesla just disappears off the face of the earth. I sure can be, but that why investing carries risk, and for that risk, you get paid a return. Based on the trends and growth, and demand, it is a risk at this point I am still willing to take.
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Michael kramer and the clients of Mott Capital own TSLA, NFLX, GOOGL
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.
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