The Big Picture "The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy." - Fed Chairman William Powell We will know more by Sunday night when the global markets open and there is or is not a coordinated central bank bail-out attempt. The success...or not, of any boost of liquidity into the global economic soup will affect EVERYTHING in the days and weeks ahead. On the other hand, notwithstanding the talking heads' consensus that lower interest rates will break the coronavirus fever and calm the market cough, there is this: Ignoring the news and paying strict attention to pattern recognition set-ups brings us to a rare weekly stochastic break-out. This is a persuasive trigger in and of itself to expect more volatility in the weeks ahead. Tesla Tesla under $750 is a steal, under $1,000 is bargain, and under $1,500 still undervalued going into the 4th quarter of 2020. From its $969 high on Feb 4th, TSLA has fallen to a low Friday of $618, a 36% decline. If you have been reading even half of these weekly updates since December 7th than you now that I have been vehement in my analogy between the introduction of the Cybertruck in 2019, to the introduction of the iPhone in 2007 and the thesis that what the iPhone did for Apple the Cybertruck (and electric transportation in general) will do for Tesla. Accordingly, let's look at how many times AAPL dropped 36% or more in its ascent from $17 (iPhone introduction) to $327 (Jan 2020 all time high) High $28.99 (Dec 2007) to a low of $11.17 (Nov 2008) = -60% High $100 (Sep 2012) to a low of $55 (April 2013) = -45% High $135 (April 2015) to a low of $89 (May 2016) = -34% High $233 (Oct 2018) to a low of $142 Dec 2018) = -39% The chart below measures returns garnered from buying Apple shares at the introduction of the iPhone at $17.45 and what the net gain would be at each one of those lows listed above. Once past the initial drawdown of -26%, the future lows after retracements represented net gains 98%, 240%, 410% and 750%. Tesla's current retracement of -36% fits right in with the AAPL trajectory, a normal retracement along a decade long uptrend of mammoth proportions, apropos for a game changer technology company with a gifted visionary at the helm. Tesla Options If you don't own shares, you should own long-term TSLA calls. If you are still in the Jan 2021 $420 or $600 calls, hold. If you are looking for a new more speculative long-term option, the Jan 2021 $1500C closed Friday at $24.45 ($2,445). At the Feb 4th all time high of $968.99, this call traded as high as $130 ($13,000). Trading Tables PRO Trading Table Premium Trading Table PS: From Friday's trading summary of ARK Invest - they're starting to buy back the TSLA shares they sold in the 900's. This is an excerpt from their daily email summaries of new purchases and sales in their funds. This was the first time TSLA has appeared in the "Buy" column since early December.
