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Thursday, 18 February 2021

My Tesla short - update #2

I logged in tonight (AEST) to check the US market open and was surprised to find that my position had been closed out, even though Tesla had dropped at the opening and was in a down trend. After scratching my head for a second I realized that the initial drop had been so rapid that the short 'relief rally' had been more than my trailing stop of 16 points, so I'd been closed out for a modest profit. I then put in a new short sale order and a trailing stop loss of 16 points.

My trades in Tesla so far are:

17/2    Sold 4 TSLA @ 844.540    closed out by stop loss @ 818.295    profit: $134.74 (USD)

17/2    Sold 4 TSLA @ 806.190    closed out by stop loss @ 777.558    profit: $147.37 (USD)

18/2    Sold 4 TSLA @ 780.520    trailing 16 pt stop loss active (currently @ 792.725)

It's hard (actually impossible) to predict the future, but Tesla appears to be trending down from testing highs around 900 in January, and *might* continue a slow decline back to the previous resistance level around 650 that it experienced in December. From there it *could* continue down to the earlier resistance level around 400, or drop all the way back to the resistance levels around 160 it initially experienced during its meteoric rise at the start of last year.

I've no idea if any of those scenarios might be realized, or how the random price movements intraday may get me closed out due to my trailing stop loss (but at least I shouldn't loose too much money while I'm asleep during most of the US trading day). I had previously traded the ASX200 index long during 2021 and managed to loose quite a bit of money despite there being an overall uptrend during that period. I found making manual decisions when to close out my positions led me to close winning positions too early, and let losing positions run too long - typical "loss aversion" behaviour at work!

Considering that Tesla has been starting its decline during the past month (down 8% since 21 Jan) while the S&P 500 has continued to slowly rise 3% during that period, suggests that the wildly optimistic sentiment around Tesla may have dissipated. Then again, I've not had much success previously with my day trading (but mostly due to opening and closing positions at the wrong time, rather than getting the general trend prediction wrong). Hopefully using a trailing stop loss may help me overcome my poor trading decisions.

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