Traders Are Sleeping on This Tesla Pattern #tsla #daytrading #stocks

Key Concepts

• Implied Move: The expected price fluctuation of a stock based on options market pricing, often used to gauge volatility around earnings.
• Proxy Trading: Using one asset (Tesla) to gain exposure to another (SpaceX) that is not yet publicly traded.
• Trading Cycle: The specific timeframe of options contracts (e.g., 7-day weekly cycle) used to analyze market expectations for an upcoming event.
• Earnings Volatility: The tendency for a stock's price to swing significantly following the release of quarterly financial results.

Market Performance and Technical Analysis

Tesla’s stock demonstrated significant bullish momentum, opening at $392 and rapidly appreciating to $408. This movement is part of a broader trend observed over the last five to six trading sessions, where the stock surged from $340 to $408. This trajectory mirrors the recent performance of Microsoft, indicating a strong recovery phase for high-growth tech stocks.

The SpaceX Proxy Argument

A central point of discussion is the relationship between Tesla and SpaceX. The speaker notes that many investors have historically used Tesla as a "proxy" to gain exposure to SpaceX. With a potential SpaceX IPO on the horizon, the speaker previously hypothesized that Tesla might struggle to reach new highs, as investors would shift their capital toward a direct SpaceX ticker. However, the current price action suggests that Tesla is maintaining strength despite this looming shift in market dynamics.

Earnings Volatility and Options Strategy

The speaker emphasizes the importance of analyzing the "implied move" when trading around earnings announcements.

• Implied Move Calculation: For Tesla, the market is pricing in an approximate 7% move in response to the upcoming earnings report.
• Quantitative Expectation: On a $400 stock, this translates to a 26-point implied move.
• Methodology: The speaker advocates for looking at the weekly options cycle that encompasses the earnings date. Specifically, the April 24th 7-day cycle is identified as the relevant timeframe, as it concludes two days prior to the expiration of the options, providing a clear window to assess market sentiment leading into the announcement.

Strategic Takeaways

• Market Sentiment: Despite the potential for capital rotation toward a future SpaceX IPO, Tesla is currently exhibiting strong upward momentum.
• Risk Assessment: Traders should utilize the implied move (26 points in this instance) to set expectations for volatility. Comparing this move relative to the stock price and the next monthly cycle is essential for determining the risk-reward profile of an earnings trade.
• Timing: Aligning trade entries with the specific weekly cycle that covers the earnings announcement date is a critical step in managing exposure to post-earnings price swings.

Conclusion

Tesla’s recent price surge to $408 reflects a robust recovery, challenging the assumption that the prospect of a SpaceX IPO would dampen investor interest in Tesla. For traders, the focus remains on the 7% implied move expected during the April 24th earnings cycle. By monitoring the 26-point expected fluctuation, investors can better position themselves for the volatility inherent in the upcoming earnings release.