Long Tesla ( from 580) but short ES ( Q XOP -4178.25 )

Earlier today TSLA was trading 578 during pre-market...

Nasdaq futures, and Tech stocks were selling down hard...

But as we all know, pre-market selling is often not indicative of how the market will trade, during regular trading hours.

The Game plan (watch video) for Tesla was to buy at around 579, which was a confluence of support, namely

Monthly F3 + 200MA + Daily Over Sold ( based on Oscillator predictor ).

And that was what I did.

Got filled on the trade during pre-market at 579, and was immediately in good profits at the open... as TSLA quickly traded back above its 200ma.... 

Despite a host of negative news coverage near the open today,

Tech stocks in general were also sitting at critical support levels ( did not break ), which gave me further conviction that my entry on tesla was a good one.

However, the market also traded in a manner that I didnt wanted to see.

The ES Broke back below its Q XOP ( node ), on a break of an established trend line..

Combination of the above gave me a bearish bias going into today's trading...

( but that did not stop me from going long TESLA at 579 )

In my mind these were  2 separate trades.

That bias is now confirmed with the ES making a lower low... ( Bearish equity indices technically )

Fundamentally however, everything suggests for US equities to trade higher

i) The Fed have already made their position clear, they want inflation to be above 2% and will tolerate a period of higher than anticipated inflation.. They are not thinking of tapering anytime soon, and will let us know way in advance.

So the overall environment will be one tolerant to an inflationary environment

ii) Many industry watchers have already voiced out that they are witnessing inflation...

this includes Warren Buffet and Charlie Munger in their recent Press conference.

and also evident in the rise in raw material prices.. ( lumber, steel, copper,) and commodities. Gold and oil (RRT) have also started to show strength.

iii) We all know that both Monetary Policy ( QE ) and Fiscal Policy ( Stimulus ) had been very aggressive in the last year.... the expectation is that most of that increase in money supply have all gone to the markets ( and evidently in Cryptocurrencies )..

Savings rate have also gone up - and consumption spending have actually went down during this period.... So the desired effect of both QE and fiscal spending have not hit the economy just yet.. not yet anyways.

iv) The 'reopening trade' will eventually happen... as vaccination continues to pick up in the USA, so it will be a matter of time before the US economy really opens up.

So theoretically, there should be alot of pent up demand for goods and services when people start coming back out of their homes...

That 'increased in savings rate ' should eventually become actual consumption, once the re-opening really take shape.

 So we should be set for an inflationary environment at minimum, with a risk for even hyper inflation. Given that the FED have already committed to their position, we probably need not worry too much about interest rates rising anytime soon, not until we really see persistently strong inflation numbers - which will lag )

Based on the above thinking, I bought into this sell-off on some equities, and tech earlier today. Commodity linked stocks are more interesting, but most of the tech/growth stocks I was watching, are all still sitting above important support.

However as traders, we trade the chart and not fundamentals...

The ES chart is actually looking quite bearish now. ( understatement )

We are once again trading back below important Higher timeframe resistance node,

Q XOP, and have since made a lower lower. As such I am bearish Equity futures, and  positioned short.

A significant sell-off ( profit taking by higher timeframe traders ) off Q XOP is reasonable, and it could be sparked by a sell-off from TECH into cyclicals... 

 Game plan.

1) Will be short the ES on a retracement back up to retest Q XOP... and will try to remain short on an intraday basis..

 2) Will try to remain long TECH, especially TESLA as long as we remain above its 200ma.

3) Will be looking for opportunities in cyclicals related stocks, and commodities ( on a retracement - like gold, oil, DBA etc )

So at the moment I am long Tesla and short ES

One of these 2 positions will end up being right.

As long as we control the risk/and loss on one, and let the profits run on the other, we should do well overall.

That being said, I wouldnt be at all surprised if both positions end up working out quite well.  We have improved our odds by controlling our entries using our Dlevel techniques and the entries so far has been great.

TSLA bouncing off 580 entry 

closing the day quite bullish.

ES trading below intraday f3

Likely closing the day bearish.

Maybe both positions will do well... but if one of these positions see a continuation move, and I get stopped out on the other, we will likely still do well overall.

Meanwhile looking at QM and GOLD for opportunities ( on a retracement )

P.S. An advice from a previous mentor comes to mind....

Bulls can make money when they are right

Bears can make money when they are right.

If you can make money without needing to be right - thats the best play.

You really dont need to be right to make money in the markets.

Concern yourself with managing small losses, and letting the winners run alittle...

Thats the name of the game - so they say... =)

Best of Trading

Joseph AuXano

DiNapoli Trading Academy