Tesla had a large gap down on earnings results. The EPS and revenue numbers were largely inline, but the number that everyone wanted to hear was gross margins per vehicle after their recent price cuts. That number went from like 30% to 20%, which caused the selloff. It points to reducing demand as the economy slows simultaneous to Tesla aggressively scaling manufacturing. Elons actions himself have probably knocked a point or two off of sales, which is going to sour investors if the company doesn't start doing better.
My thesis for the open was to look for weakness and subsequently spots to enter short. Instead what we got off the open was a dip that didn't even take out the pre-market low, followed by a move above VWAP. I saw the pre-market high as the lowest risk entry for a pullback within the range already established.
Setup & Trade Entry
The 168.80 area was the pre-market high (not after hours, just pre-market). I put my offer there and it got hit as price quickly wicked into that area and was immediately back below. If I had not had my offer sitting there already, the chances of me getting filled would be almost zero. I was risking 40 cents to the actual pre-market high, which was just a wick.
The trade almost immediately was working because I got wicked in. I was taking off risk as I got about 65 cents in the money. I usually like to take a little off about 1R from my entry and this was a little better than that. I continued to take off some into 167.70 before price retraced to the 169 area. This time it wicked up to 169.69, but was very quickly back below my entry, which gave me a place to put my stop. The fact that I had some profits already let me stay in the trade even though it went a little higher than I'd have liked. I then continued to trade short against 169 and take off risk lower. My best cover was 166.62, before price came over VWAP and hit my stop on my last bit.
I need more of this. I showed great patience in waiting for the ideal entry and then was able to generate some cash flow to keep me in the trade when it retested my entry area. When something is wicky like TSLA was off the open, you have to have good conviction in your trades to stay in them. As I scale up, trades like this will be that much more lucrative. I'm sure you could take this same trade with hundreds of shares and no liquidity issues. On average, I made just over $1 per share, which was great. Without reservations I can call this one good trade.