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Thursday, June 7, 2018

Tesla: No Idea How Shorts Stay Short

Tesla told you they are gunning for a profit in Q3 and Q4, which would be huge. Tesla just told you that their key metric, weekly production of Model 3s is on target. If you're short, how in your right mind do you say 'la di da, no biggie, it's going down.'

That makes no sense. These shorts are going to get smoked.

Reminds Me Of Some Other Shorts

Ahead of earnings we said that Trade Desk and AMD shorts were in trouble because of expected good news. Both stocks were rocket ships.

Trade Desk is up 60% since earnings on May 10th and AMD is up 54% since earnings April 25th. I wish we could annualize that, right?

Short interest was high going into both Trade Desk and AMD earnings and, sure enough, good news smoked the shorts.

Tesla's Percent Of Float Short

Trade Desk had about 33% of their float short and AMD had 22% of its float short.

Tesla has 31% of its float short and the short interest has been moving up.

I Don't Understand How You Stay Short?

Tesla tells you they plan for a profit in the back half. They are quickly firing people, cutting costs and running to get to profitability.

Then they tell you their key metric, 5,000 Model 3s produced-per-week, is on track.

If I was a short (which I'm not and frankly I don't want to be short because it leads to a depressing outlook on life hoping the world blows up before trading tomorrow plus markets go up over time plus shorts are crowded thanks to hedge funds having to be 'hedged,' whoops, got side tracked)... If I was short (which I'm not and ....) I have to acknowledge some incredibly huge management comments in my face. Then if I was short (which I'm not and...) and I saw the stock ticking higher and higher I have to cover and push that stock up even more.

That's how a short squeeze works.  Shorts need to respect the data that's out there. But I think shorts cemented their shoes into this one.

I think that's how AMD and Trade Desk jumped so much on great news; lazy shorts and lots of them.

Conclusion

We'd expect shorts to blink sometime before we get to earnings in late July or early August which would mean higher stock prices sometime soon.


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Reading Comprehension
I don't love shorting because
A) Hollywood is rallying against shorting
B) The EU's new regulation GDPR doesn't allow shorting in Google or Facebook
C) June is officially "I don't want to short month"
D) It's crowded and generally depressing
Answers in comments, please.

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