10 Lessons from the Tesla short squeeze/FOMO rally1- Do not short one of the most shorted stocks of all times
There was more than 30% of the float shorted, one of the most shorted stock ever in term of dollars or percent.
So many short sellers in Wall Street. What did you think would happen?
Anything above 10% is too high in my book.
2- Short squeezes can be huge, there is not level where "it has to stop going up now"
Not the first time that a company rallies massively.
Remember when volkswagen became the largest company in the world for a few days?
Do not be stubborn.
3- Do not have "personal conviction" shorts, what I mean is don't get attached to it
Classic commandment.
4- Do not short cultist stocks (unless you really know what you are doing which most of Wall Street is not)
Elon Musk is a celebrity CEO that has a cult following, his cultists do not act rationally, they will hold to zero.
They know nothing about investing, they do not read reports, they have cognitive bias and will make "magnet" arguments and argue with about everything no matter how clear and undeniable it is. Some of those clowns think the world is going to end and their life depends on TSLAQ I mean... No point even trying here.
The brainwashed TSLAQ cult is one of the worse in human history.
Know how hard it is to save people in a sect? Here it is even harder I reckon.
5- Have a tight stop (or other disposition), and trail your stop when well in the green
The market can stay irrational longer than you can stay solvent. Nuff' said.
6- Think for yourself, do not follow the herd
The herd... direction the slaughterhouse. I could write a list of famous quotes about thinking for yourself, being a contrarian etc.
7- Keep an eye on the news: worldwide climate alarmism
Extinction Rebellion made a name for themselves, I don't know if they are new or old but only became famous recently.
You had Greta, you had the Australian fires (caused by climate activists as well as a government telling farmers not to burn waste for years but to leave it lying around to make sure big wildfires happen one day).
90% of who the climate alarmist are either young scientists that have no stature yet and want grants, left wing politicians that always welcome new reason to tax people, and xtra gullible 16 yo girls that trust their bf that keep lying to them and that cannot buy stocks.
There's also alot of tech savvy millenial boys with glasses I am sure every one has seen several of them on tv, they get super angry when they hear "a denier" and start attacking him "oh so when science cures you you believe in it right" and deny anything he says (oh the irony) and don't let them speak, they get so reptilian brain angry...
Easy to imagine how that can translate into "investing in the savior Elon Christ" regardless of rational facts such as TSLAQ being a pyramid scheme garbage company that hasn't turned a profit in 20 years for example...
8- If you find an interesting short, keep it to yourself
Tesla bears kept advertising their short to every one on earth dragging more competition in... Then it ends up being shorted by every one including novices that just heard about it...
9- Stay away from companies that have high up potential
Heavy retail interest, big rallies in the past, are red flags.
A stock that went up 900% 2 years ago could do it again.
With Tesla, Robinbros of course bought more as it was going down, and took profit very early when the price went up, but after alot of going up they finally couldn't resist anymore, and started buying lots and lots. Thousands of Robinhood users FOMO'd in after TSLAQ crossed $700.
Big vertical rallies on TSLAQ were not accompanied by large reductions in short positions.
Quoting reuters:
"
One factor driving the rally may be fund managers hurrying to raise their allocation of the stock, said Thomas Lee, managing partner at Fundstrat Global Advisors.
Some fund managers whose portfolios are benchmarked to the Russell 1000 and Russell 1000 Growth indexes may have avoided loading up on Tesla shares due to their volatility and subpar performance in 2019 compared to those benchmarks, he said.
“Last year, it was a name that was tough to own,” Lee said. “People have a lot of catching up to do.”
"
It's really more about abusing reptilian brains and knowing what ridiculous beliefs others have than being right about a company itself...
10- Do not go against parabolic moves unless you "know what you are doing"
Hey I had 9 points but I just added this one, 10 is way better.
There are always the "educated" gamblers that are going to want to short every parabolic move (parabolic doesn't mean "that went up alot" parabolic means going up parabolically, as opposed to in a linear way which can go up lots too).
Some of these kids see their indicator at a high value and think it is time to go short and get burned over and over till they quit.
If you identified a specific level and know it works well and know how far your stop should be you can short a parabolic move, ok you know what you are doing.
I believe:
- Joining the trend = Most forgiving of all
- Shorting parabolic moves = Probably most punishing of all
Not sure if it is the very worse, I have heard terrifying stories about people buying or selling slowly chugging trends. I mean... I will be blunt... You gotta to be a whole special kind of stupid to do this, and worse to stay in thinking "it's not that strong, has to reverse eventually" and grow your loser bigger and bigger.
So idk if this counts it's just too dumb to be a real thing.
For the advanced gamblers if you identified a great level do not be scared and do not remove your order because of a vertical candle or a scaaaary parabolic move, trust me go backtest it, it works even more often.
