Short TSLA, Long XLE – The New FOMO Trade?

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Everyone knows that S&P 500 and Dow Jones price action has been as pristine as it’s been boring … and there’s a trace of that’s ‘too good to be true’ in the hair.

I wanted to find out how the most recent rally stacks up to others in the past and if that calm turned out to be the calm before the storm. Here is what I found.

I personally don’t like chasing an over-bought market (although that’s not been a great mantra to live by) and prefer lower-risk setups … like this one discussed in the April 11 Profit Radar Report (chart includes original annotations but updated price):

There’s been a fierce battle between value and growth – risk on vs risk off sectors. XLE (SPDR Energy ETF) appears to offer one of the more attractive entry levels near current price. XLE is testing the trend channel (48) with next support around 46.80 (blue circle).

The chart includes a potential Elliott Wave Theory count, which makes an eventual rally into the 55.65 zone likely. Wave 4 (or IV) corrections can be complex and drawn out, but buying XLE around current price or after a quickly reversed dip below the trend channel looks attractive. More aggressive investors may buy XLE around current price, but we’ll look at buying XLE after a successful test of the 47.20 zone.”

Who would have thought that short TSLA is the new S&P or Nasdaq FOMO (fear of missing out) trade?

But there was a solid setup to short TSLA, as discussed in Monday’s special Profit Radar Report update (chart includes original annotations but updated price):

TSLA closed at 762 today. According to Elliott Wave Theory (EWT), the decline from the January high to March low traced out 5 waves. The bounce from the March low looks like 3 waves. The 78.6% Fibonacci retracement is at 762.53 and wave c = wave a at 769.37.

The TSLA bounce could finish in the 762 – 769 zone. Additional resistance is around 795 (trend channel) and 823 – 838 (78.6% retracement and C = 1.382 x A).

EWT has been essentially useless for the major indexes and excess liquidity may also void this signal, but it’s been rare to get such a clear read and confluence of resistance levels like seen here.

As mentioned, TSLA is a fast-moving stock not for the faint of heart . We will initiate a small short position at tomorrow’s (Wednesday) open.

TSLA opened at 770.70 on Wednesday and quickly fell to 730. There is a small chance that TSLA will still reach the 823 – 838 range (breakout of the purple triangle) but with a stop-loss at breakeven we can wait if TSLA finds support around 700 – 710 or not.

Continued updates and factual out-of-the box analysis are available via the Profit Radar Report

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”TSL

Why ‘Hot New Tech’ is Getting Crushed by ‘Old Tech’

Until recently, the Nasdaq was driven higher by hot new tech names like Facebook, Priceline and Tesla. Now, ‘hot new tech’ is cooling down while tech dinosaurs are rallying higher. What does this rotation mean?

Priceline, Netflix, Facebook and Tesla are the driving force behind a ‘new and improved’ technology boom.

Those companies are cutting edge, hip, and until recently hot.

But something changed in March. Hip wasn’t hot anymore. PCLN, NFLX, FB and TSLA are all of a sudden 10 – 20% below their highs.

It seems like the money left ‘Hot Tech’ and moved into ‘Old Tech.’

Dinosaurs like Microsoft, Oracle, Cisco and Intel just got a vitamin M shot and boost (M as in Money).

What does this ‘changing of the guards’ mean?

Here’s one possible reason: Stocks in general and the Nasdaq in particular have gotten pricey.

Investors don’t want to go into cash (yet), but they are taking some risk off the table by rotating from high beta tech into ‘tried and true’ low beta tech.

As the third chart illustrates, the Nasdaq (Nasdaq: ^IXIC) has also started to underperform the S&P 500.

The S&P 500 (NYSEArca: SPY) is now top dog and just spiked to a new all-time high this morning. Is this a technical breakout or just another fake out?

Here are two charts that may well change your expectations for the S&P 500:

S&P 500 – Stuck Between Triple Top and Triple Bottom – What’s Next?

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

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Tesla Hit By Technical Circuit Breaker

Few companies ever reach the kind of ‘cult’ status Tesla generated in a few short years. At one point, TSLA was up over 450% in 2013 alone, but the stock has dropped almost 30% in recent weeks. Is Tesla the new Apple?

Every bull market has its ‘darling’ stocks. Stocks that drive the market up … and may just pull it down.

Tesla (Nasdaq: TSLA) is one of them. In fact, Tesla has almost become a cult movement.

But what goes up must come down.

I have a hard time chasing overvalued stocks (perhaps due to my frugal German heritage) and sometimes feel tempted to ‘oust’ cult stocks that just don’t deserve their price tag.

This is a dangerous game so I don’t play it often. In fact, there have only been two stocks I’ve ‘ousted’ in the last two years.

Back in September 2012 it was Apple (Nasdaq: AAPL). Via the September 12 Profit Radar Report I gave this – at the time almost sacrilege – warning and recommendation:

“Aggressive investors may short Apple or buy puts or sell calls above 700.” The rest is history.

I have only written once about Tesla in my Profit Radar Report. This was on August 31, 2013:

Every once in a while I like to look at stocks that look too ‘bubbleicious’ to ignore. The current target on my radar is Tesla (TSLA). Tesla is overpriced and the business model is not as sustainable as the stock price suggests, at least in my humble opinion. Bubble stocks often move higher than expected, but when they crash it’s a sight to behold. For aggressive capital, I would consider to start buying longer-term (4 – 7 months) puts. The key is to spread out small amounts over a period of time. This is a ‘gamble trade’ for gambling money. Initial support appears to be around 158.”

On September 3 (August 31 was a Saturday) Tesla opened at 173.4. Today TSLA is around 140. More importantly, TSLA is below support at 158.

Investors today are almost as gung ho about stocks in general as they were about Tesla a couple months ago. Click here for an Analysis of Current Sentiment Extremes.

Is Tesla’s slump a harbinger for what’s next for stocks?

Tesla is a component of the Nasdaq Composite and the Nasdaq-100 (Nasdaq: QQQ), so TSLA does affect the broad market, but only by a small margin.

Perhaps more importantly, Tesla’s stock may be a reflection of a shift in sentiment. Time will tell. Next support is around 135.

More important for the broad market is the fact that the S&P 500 (NYSEArca: SPY) and Nasdaq are bumping against major long-term resistance.

Failure to overcome such resistance could morph into frustration and lower prices.

Two eye-opening charts featured in this article reveal the key resistance for the S&P 500 and Nasdaq. Where is Long-term Resistance for the S&P 500 and Nasdaq?

Simon Maierhofer is the publisher of the Profit Radar Report.

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