Feb.8 Trade Review: Tesla $TSLA
Tesla has become a huge winner today. Let’s go over the trade and my thought process on why I chose to play it the way I did.
The #ES E-Mini chart below shows the overnight movement. Price tried to break over the important 4180 level but failed. It made a grind down the rest of the night and lead to a gap down at the open.
Based on the strong day yesterday and dip buyers consistently jumping in anytime we test major support levels, I was looking for relative strength tickers to take a backtest trade on.
pre market was hovering right around where it closed yesterday. While it wasn’t quite green leading up to the opening bell, it was flat enough to show relative strength to the broader market. Further, given the strength on the daily chart and the big run up, it was enough to put it at the top of my list to go for a trade.
I’m watching Tesla, QQQ, and S&P500 closely to make sure we don’t get a gap down and go down further. The first few minutes the market looks like its holding up giving me the confidence to jump into TSLA calls once the entry price breaks.
All times Pacific:
6:37 - 1st Entry on the break over 197.50. In last night’s newsletter, I mentioned I was looking to take an early entry over yesterday’s highs of around 197.50 using the 210 calls. Even though this was early, I felt there was enough momentum in TSLA. Further, many traders would be watching 199-200 and if the call trade could get over 200, it would be enough for the 1st exit with around 40% gains.
6:47 - 1st Exit taking 1/2 position off at 40% gains. On the break over 200, price shot up fairly quick and pushed the calls into positive territory. I take my 1st scheduled exit at a 40% limit trade.
6:48 - 2nd Exit taking another 1/4 of the position off at 75% gains. Price shot up quick on the 200 break and, in hindsight, I should’ve played the position price vs option price. But, I was happy to take good profits.
7:03 - 1st add on 199-200 pullback more 210 calls. Simple Idea. 199-200 is the big support level. At the time, #ES was lingering around 4150-4160 and couldn’t pick a direction. Given Tesla’s initial market strength, I figured there would be dip buyers looking to get in at the 200 backtest.
7:16 - 3rd exit 1/2 total position at 50% profit. Again, a fixed systematic profit. Nothing special here.
7:49 - 2nd add of 210 calls. My cost basis has come down just a bit but my position size is close to the original size based on using just the profits. This add was the same idea as the 1st add. The major difference on this add, I was buying into a downward market. This gave me some worry, however, I was using all profits at this point. TSLA price did come down to under 198 and I was getting close to closing the trade out. However, it bounced well off 198 and then just chopped sideways for the next few hours.
11:17 - 4th exit 1/2 off total position at 50% profit. Systematic profits again. At this point, this is a massive winner. I more or less can do whatever I want with the rest of the position…sell on a dip, sell here and take the rest off, swing overnight. I’m choosing to swing overnight as long as 4100 holds up on #ES.
Hope that is clear and helps. Any questions or need help with anything, comment below or shoot me a DM on twitter!