Strategy & Guidance: Navigating the TSLA Selloff (and why TSLA matters for the S&P 500)
Brief Strategy Note for Members.
Note: This is a brief strategy note outside of our usual Bi-Weekly report that is simultaneously being sent to Patreon Members. This is a note about Tesla, a very important key holding for Retail Investors that convey the market’s sentiment for risk.
Members,
Tesla is now being knocked out of the S&P 500’s top 10 largest companies - now at #11, behind NVDA.
To put it in context, TSLA was a top 5 component just roughly 3 months ago.
Based on my understanding, there is a significant cohort within the retail investing crowd that is heavily invested in TSLA. The weakness in QQQ or SPX masks the true pain that some retail investors are facing. And that is because much of their equity exposure is in Tesla.
During the period of 2020-2021, Tesla has singlehandedly produced great fortunes for a segment of retail investors.
This crowd is now scrambling to understand next steps for this key name. In this note, I will provide a brief note on strategy and guidance now that TSLA has entered our discussed Zone back from the weekend.
Although Tesla is #11 in the S&P 500, it holds considerable influence in the index because just like Apple, a great deal of the Semiconductors sector will benefit on any improved outlook in Tesla and the EV sector.
The opposite is also true. Semiconductors will face pressure as a whole if Tesla’s growth story gets into question.
The truth of the matter is: the SOXX Semiconductor index WILL drive sentiment towards the S&P 500 and Nasdaq. For this reason, having at least a foundational understanding of Tesla’s organic price action will give you an informed opinion on where broader risk sentiment is heading.
In this note, we’re going to discuss objective auction data behind Tesla at today’s current level (~140-142) and objectively think about how its share price is reacting to the many narratives that it now faces.
In this note, I will not go over Tesla’s latest headline developments. This is because the news is readily available if you want that commentary. I’m going to focus purely on the price action using organic data.
To aid in my analysis, I will provide Orderflow data and a Supply & Demand reading on TSLA.
We’ll go into the lower timeframes and see what the Market Auction is telling us.
And then, I’ll discuss how I’m building my position in TSLA. What my entry strategy is, and perhaps even more importantly, what my exit strategy is.
Let’s discuss. We are now in the Eye of the Storm. 🌪