We have reminded ordinary investors time and again, not to be a prophet, never short a stock just based on fundamental analysis.
- A stock may overshoot before it comes down.
- The overshoot may last for months, or even longer.
- Personal or professional assessment on fundamentals may not be correct.
- The company may have a lucky break.
A good time to short is when
- The long-term up-channel has been broken.
- The price has reached the break-down line of the up-channel.
- At least a daily down-channel is formed.
Please refer to:
- Topping Patterns and Channel Trading
- What to short now and how DIY?
- How to handle short-squeeze, DIY?
Over the past 20 years that we serviced ordinary investors, we’ve seen college professors and research analysts got burned from shorting. They were often right on the fundamentals, but their timings were off by months.
It is better late than wrong, when it comes to buying.
It is better early than wrong, when it comes to selling.
However, we are not saying it is time to buy Tesla.
Mr. Musk is a champion in many fields. To name a few.
- Master of mesmerizing. The darling of media. Massive free press coverage.
- The lord to cult-like As brilliant as Tesla or better, the creator, the visionary, the deal maker, the smart investor, the can do executioner.
- Master of exploiting government sponsorship, or the major beneficiary of the tax money. For instance, the subsidies for e-car, solar roof, green energy.
- Master of disguising a huge monster as a perpetual start-up. To name a few of the latest:
- Robot software
- Brain laces
- Tunnel or underground superhighway
- Master in fundraising, from the super riches, the banks, institutions, the stock investors, and even from the consumers. Tesla’s liability is higher than $20B.
- Master in turning his personal interest into company’s interest, and into a public interest. For instance, before SolarCity (founded by his cousins and funded by him) went belly up, it got absorbed by Tesla. And many of his worshipers believed it was done for a bigger picture.
- Anyone who challenges is prone to be ridiculed as being a status quote, a loser in stock, a person without vision.
All of the above are not intended to say that Tesla will boom or crash, but to remind those who do or did short-selling, there are many people who don’t think like you.
The stock price of Tesla may be pushed higher by
- The media
- The bankers, institutions and big players that lent or invested a lot in Mr. Musk.
- The worshipers
- The lucks
We are followers of Mr. Buffett, Lynch, O’Neil, and Elder.
We think a good stock to invest or trade is when
- The trend of the company’s growth matches the trend of its stock price movement.
- That is when “Earnings” matches “Channels”
A channel is formed when the price movement is in a waveform and within two nearly parallel resistance and support lines. Please refer to
In this essence, we can classify stocks into two categories:
- P/E stocks, Price over Earning
- P/D stocks, Price over Dream
For P/E stocks, the Earnings lead the Channels.
First, find the stock that grows or declines steadily, and then use channel trading to establish a long or short position. Use action plan in “Earning Channel” to receive the alerts for increasing/decreasing position, or to clean the position.
For dream stocks, the Channels lead the Earnings.
In fact, the channel is the only protection an ordinary investor could get.
- Take profit when the price surges after a long bull. That is when the price goes beyond the break-up line of a long up-channel.
- Clean position when the up-channel is broken, that’s when the price goes below the break-down line of a long up-channel.
- Perform proper position adjustment and profit-taking within the channel
- Sell some at channel sell point.
- Buyback some at channel buy point.
Please practice with Earning Channel. It will tell you when to act.
We really don’t know what the outcome of Tesla may be.
- Will Tesla beat not only GM and Ford, but also BMW, Mercedes, Audi, Lexus, etc?
- Can Tesla become a volume player in China market?
- Can Tesla’s solar business outgrow those companies sponsored by the Chinese government and crashed?
- What if the deficits go too high and the US government stops subsidizing clean energy or green power?
- What if there is a major correction in the US stock market?
- What if there is a political turmoil?
We urge ordinary investors:
- Don’t short, unless the long-term price channel has been broken, and at least a new daily down channel is formed.
- Don’t chase, when the price surged above long-term channel’s break-up line. It is in turn a good timing to take major profit.
- Use band trading tactics to protect your profit, now that the price is high.
- Act fast and clean or greatly reduce your long position when the price goes below the channel break-down
Channel is the best protection for
- Buying dream stocks.
- Short selling any stock.
Hope this discussion is useful to you.
Please use Earning Channel to work out an investment strategy and trading tactics of your own. You will not only know what to buy, but also when to buy and sell. The system is a systemic implementation of channel trading and stock selection. It will provide you the alerts for optimal timing.
Good luck on your investment.
The Earning Channel software, as well as the articles, tutorials and suggestions in the website and social media, are provided as tools and references to help users develop their own market analyses and make their own investment decisions. Users are ultimately responsible for the way in which they use this information to invest in the stock market. Nothing associated with the Earning Channel or the information presented in articles and tutorials should be interpreted as direct advice on buying or selling of securities.