TSLA Deep Dive & Bull Macro Trend
7/9/23 Prospero.Ai (43rd) Weekly Newsletter
Hope everyone had a great holiday week!
2023 picks took a hit but still at 115% annualized return above the S&P500 and a 68% win rate per pick against their S&P 500 benchmarks.
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TSLA Deep Dive
TSLA returned 4.84% this week vs -1.07% for the SPY. We are glad that we did not drop it. The signal patterns on TSLA have been so interesting, especially this week, that we are going to devote a good deal of space to analyzing them.
One thing is abundantly clear: as Net Options Sentiment displays high lows and the closer it gets to 100 for TSLA it quite accurately predicts big Bull runs. And as we alluded to above, the reason we write the newsletter is to teach a process that even newer investors can apply. Exhibited by the fact that power user @Tradernatehere called this latest breakout weeks before our newsletter covered it. But we wanted to zoom in on a fascinating part that we see at the end of the graph.
Prior to market open on July 3rd TSLA made big news by beating their delivery estimate. And our signals clearly show how institutions were both betting big on positive news before the event in the short term options markets (Net Options Sentiment). But immediately following the news, about as clear as signaling can get institutions made a massive shift in those bets towards the long term options markets. (Upside Breakout) It makes complete sense as most seem highly Bullish on TSLA long term, but there appears to be some worry about a short term dip inherent in the quick drop in Net Options Sentiment. This reminds us of one of our favorite past examples of this where META showed a similarly overt shift in bets after a Bull run. This is exactly what we spent years perfecting and it is always very rewarding to see our signals display such a unique and clear perspective.
Much like with Nate above it is so important to watch these metrics on a day to day basis in our app because they can provide a lot of help to analyze information in between letters. Keeping with TSLA, we can see two examples in a short time frame where it predicted price swings before they happened. (Net Options Sentiment first falling before a price drop, then rising before a price climb)
So where does this leave us with TSLA? It is a bit of a tough spot. As you can see in the past we dropped TSLA when it broke away from the top of the Net Options Sentiment scale. But seeing as it is now 100 on Upside Breakout we are going to keep it in. We do think a price correction might absolutely be imminent but as we will discuss more below, we are very Bullish on Growth long term so we aren’t going to get too cute and trade in and out of TSLA unless we see a glaring sell sign (IE Upside Breakout AND Net Options Sentiment both under 85)
Bullish this week if:
TSLA Net Options Sentiment > 65
TSLA Net Social Sentiment > 50
QQQ Net Options Sentiment > 30
Bull Macro Trend
For Tech: QQQ Net Options Sentiment > 40 = Bullish. < 30 = Bearish.
For Non-Tech: SPY Net Options Sentiment > 20 = Bullish. < 10 = Bearish.
QQQ returned -.86% this week vs -1.07% for the SPY. Even though we did see Net Options Sentiment on QQQ dip it still stayed in our Bull zone. But we do expect QQQ Net Options Sentiment to remain Bullish overall for the foreseeable future. So it is important to watch SPY Net Options Sentiment for a better view of potential directional changes. We did see that go all the way down to zero for a time this week.
On the macro front, we are seeing continued strength in jobs numbers. Powell has consistently indicated that would press him to continue to be aggressive with rate hikes. So strong jobs data along with the clear increase in bets for rate hikes should coincide with heavy Bearish market movement. Why aren’t we seeing that though?
The only way this makes sense is that the market may be indeed be more confident that inflation will subside quicker than perhaps is being forecasted. Even with rates staying higher for longer than anticipated the market overall is behaving as if we saw the bottom and we are putting that squarely in the rearview mirror. But this has absolutely been our expectation as we started our heavily growth centric model portfolio. Evidence mounts that it may be now or never to get in on incoming massive gains with Growth stocks, especially in the tech sector. So keep your eye on Growth in the “Highs and Lows” section of the app which is how we found one of our biggest recent winners. A big reason to catch our livestreams, we first mentioned ENVX on our May 15th stream and it is up 50% since.
Through a newsletter we’ve mentioned before, Cubic Analytics we found this interesting graph, which we talked about and cited on Twitter.
If this pattern does hold as it has pretty well, this would mean we would hit the Fed’s 2% inflation target in time for the new year. Even if we see evidence of it moving in this direction this will send the Growth stocks we are talking about through the roof in our opinion.
For Tech: QQQ Net Options Sentiment > 40 = Bullish. < 30 = Bearish.
For Non-Tech: SPY Net Options Sentiment > 20 = Bullish. < 10 = Bearish.
Keeps - Staying as a pick but unchanged guidance
Bull review - META (Meta Platforms Inc) from 7/2 letter and Bullish this week if:
META Net Options Sentiment > 75
META Net Social Sentiment > 50
QQQ Net Options Sentiment > 30
META returned 1.24% this week vs -1.07% for the SPY. META briefly saw its Upside Breakout go below 80 this week and despite charging back up it settled on 99 as it could not beat TSLA. META is still the best investment when it comes to Net Options Sentiment and Upside Breakout combined 188/200. Anything over 180 is considered excellent.
Bear review - FRHC (Freedom Holding) from 7/2 letter and Bearish this week if:
FRHC Net Options Sentiment < 40
FRHC Net Social Sentiment < 60
SPY Net Options Sentiment < 10
FRHC returned -2.87% this week vs -1.07% for the SPY. It is improving in our signals but still Bearish with very low, 7, Net Options Sentiment and Profitability (37) + Growth (28) = 65.
Bull review - CFLT (Confluent Inc) from 7/2 letter and Bullish this week if:
CFLT Net Options Sentiment > 70
CFLT Net Social Sentiment > 25
QQQ Net Options Sentiment > 30
CFLT returned -4.33% this week vs -1.07% for the SPY. Upside Breakout finally bounced back here and we are glad we held on even in a bad week. After falling as low as 46 it is back up to 70 and might be a great time to buy.
Bull review - ELF (elf Beauty Inc) from 7/2 letter and Bullish this week if:
ELF Net Options Sentiment > 70
ELF Net Social Sentiment > 50
QQQ Net Options Sentiment > 35
ELF returned -3.70% this week vs -1.07% for the SPY. It did see some insider sales this week but Upside Breakout went all the way up to 77 to end the week. Net Options Sentiment is getting dangerously close to our warning at 73 to end the week so we will have our eye on it, but keeping it for one more week for now.
Bear review - GLPG (Galapagos NV) from 7/2 letter and Bearish this week if:
GLPG Net Options Sentiment < 50
GLPG Net Social Sentiment < 60
SPY Net Options Sentiment < 10
GLPG returned .84% this week vs -1.07% for the SPY and still has all the makings of a great Bear pick. Especially longer term with a horrible Profitability (15) + Growth (16) = 31.