Good signs for the S&P 500 and a possible warning for TSLA

By Jani Ziedins | End of Day Analysis

Jul 22

Free After-Hours Analysis: 

The S&P 500 finished Wednesday modestly higher as it continues setting new highs for the Covid rebound.

Infection rates remain elevated but scientists are making progress on a vaccine. Unemployment is off the chart but governments continue handing out free money. For every negative, there is an offsetting positive. While the cynics obsess over the negatives, the market continues focusing on the positives. Stocks are not racing higher like they were in March, April, and May, but they are amazingly resilient. 3k support was rock solid in June and we keep bouncing back to the rebound’s highs. As I often write, a market that refuses to go down will eventually go up.

We make money following the market’s lead, not reacting to headlines. If this market doesn’t want to breakdown, there is no arguing with it. There is no room for “should” in the market. Either it does or it does not. Anyone trading “should” is losing a lot of money right now and we don’t want to join that group.

Keep moving stops up and waiting for higher prices. We are still on track to challenge all-time highs over the next few weeks. If this market was going to breakdown, it would have happened by now. The road won’t be fast or straight, but as long as we keep experiencing more up than down, everything remains on track.

TSLA reported earnings after the close and pleasantly surprised investors by producing the fourth consecutive quarterly profit. The big news is this achievement qualifies the stock for admission into the S&P 500. But more surprising than the profit was the lackluster performance in the after-hours session. While most CEOs would love their stock to pop 4% following earnings, TSLA makes bigger moves on a random Monday. To be honest, 4% is fairly disappointing given the headlines.

If TSLA rallies 10% tomorrow, then I read too much into this. But if TSLA slips into the red tomorrow, it is best to start taking profits before the losses accelerate. While gaining admission into the S&P 500 would be a huge boost for the stock, there is a good chance this event is already priced into the stock and we could easily fall into a “sell the news” letdown.

It is okay to hold for higher prices but keep your trailing stop close.

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.