Hi Traders,
Both of my names this week come out of earnings reactions.
One got hammered on July 23 and has spent three weeks grinding it back. The other got good news on August 3, ran for three days, then quit.
The report itself matters less to me than what buyers do in the sessions after it.
That’s where both trades are this week.
Tesla Left a Hole on July 23
Tesla (TSLA) reported after the close on July 22. Revenue was a record $28.24 billion, up 26 percent, on a record 480,126 deliveries. The trouble was underneath, where operating margin dropped to 1.4 percent and free cash flow went negative for the first time in over two years.
The next day the stock fell 14.52 percent on 115 million shares, roughly four times its usual volume. A move like that leaves a gap on the chart, meaning a stretch of prices where nothing traded because the stock opened so far below the previous session.
July 22's low was $372.90 and July 23's high was $342.11. Everything between those two numbers is empty.
Sellers gave up on July 29 at $297.38, which was a 52-week low. Since then, every dip has stopped at a higher level than the one before it.
Wednesday was the latest one, with TSLA closing at $327.51. Buyers came back Thursday and pushed it up 3.8 percent to $339.96.
The momentum readings support the move. RSI, which measures whether a stock is gaining or losing steam, printed 19.9 on the day of the crash and sits near 41 now. MACD, which tracks the short-term trend against the longer one, has turned positive.
There's real news behind the bid too. Tesla settled a three-year Swedish labor strike, filed plans for a $10.1 billion solar plant in Texas, and posted record sales in Japan. The 47 analysts covering the stock carry an average target of $396.62.
Tesla makes money two ways. One is cars, the Model 3, Model Y, Cybertruck and Semi, plus the software, insurance and service that go with them. The other is stored electricity: rooftop solar, Powerwall batteries for houses, and Megapacks for utilities.
The energy side is the one I'd keep an eye on. Tesla deployed 13.5 gigawatt hours of storage last quarter and that business keeps growing whether or not vehicle demand cooperates. It's a big part of why the stock still trades where it does after a quarter like this one.
The gap runs all the way up to $372.90. I'm looking for $369.26, just under the top of it.
Boeing Quit at 240
Boeing Company (BA) is my least favorite chart this week.
The FAA certified the 737 MAX-7 on August 3 and the stock jumped 8.03 percent that session, from a $221 open to a $233.49 close. It kept running for two more days and closed at $240.19 on August 5.
August 6 ended that. The stock opened at $240.00, sold off all day and closed at $232.19, down 3.33 percent on seven million shares. That was the heaviest volume of the entire move, which tells me sellers were sitting up there waiting.
Six sessions later BA still hasn't gotten back over $240. The bounces keep failing lower, at $237.11, then $234.59, then $233.58. Thursday it closed at $230.33.
That's a bear flag, a slow sideways drift after a sharp drop. Those usually break in the same direction as the drop that started them.
The numbers underneath aren't much better. Boeing lost $322 million last quarter and took another charge on the Air Force One program. Defense sales grew 13 percent and that segment still lost money, while the July commercial backlog slipped to 6,192 planes from 6,202.
Boeing does three things: builds commercial jets, builds military hardware, and services both. The jet business is what moves the stock, and it's been digging out of the MAX mess one certification at a time. Defense and services hold up better, but they can't carry a commercial line that just got its smallest MAX approved after years of waiting.
I'll give the bulls their due here. Argus upgraded Boeing to Buy with a $265 target on August 11, and the stock is still above its 200-day average. This is a name I'd stay away from rather than one I'd fight.
My target is the median line at $221.63, the center line of my pitchfork and the level a stock tends to drift back toward once a move runs out of buyers. That's also where the August 3 rally started, so a trip down there gives back the whole certification pop.
Before Monday
Two things:
- It isn't too late to join my Mastermind. It runs seven weeks, we meet four times a week, and you'll be trading alongside my Project Next service the whole time. It starts Monday, and 1DTE overnight plays are the most fun I have all week.
- Both of these names go on the board for Monday's Ticker Highlight Show, and I want to see which one the crew takes. Tap this link, name your own subscription rate, and Monday's pick lands in your inbox as soon as it's out.
Trade Accordingly,
Licia Leslie