Tesla rally fueled by fear of missing out, not short squeeze; Only About 1 in 5 Analysts Rate Tesla Stock as a Buy

Feb 5, 2020

Lead Stories

Tesla rally fueled by fear of missing out, not short squeeze – investors
April Joyner – Reuters
A nearly 14% gain in Tesla Inc’s stock on Tuesday was likely sparked by investors looking to hop aboard its remarkable rally, rather than a reversal of bearish bets, an analysis of positioning dynamics showed.

Only About 1 in 5 Analysts Rate Tesla Stock as a Buy
Al Root – Barron’s
Canaccord analyst Jed Dorsheimer downgraded Tesla shares from the equivalent of Buy to Hold following a two-day rally that sent shares up almost 50% at the peak of trading Tuesday. Only roughly one in five of the analysts that track the stock now rate it at Buy. “Given the 3,000 per week China Model 3 production expectations in a country that remains on lock down, we feel a reset of expectations [in the first quarter] is likely and thus needs to be reflected in the valuation,” wrote Dorsheimer in a Wednesday research report.

Move Over Bitcoin – $TSLA Is Here
RCM Alternatives blog
Maybe you’re one of those passive investors who doesn’t follow individual names… Maybe you’ve been stuck on an island talking to a volleyball. Whatever your reason – if you haven’t seen the price action in Tesla $TSLA shares this year – you’re missing one heck of a show. It’s like 400 million people in China have the Coronavirus and the only cure is to buy a Tesla. Here’s what Elon Musk has been looking at on his phone (likely second by second).

U.S. Crackdown on Chinese Stocks Hasn’t Been Ruled Out Yet
Jenny Leonard and Sridhar Natarajan – Bloomberg
There is a sense in the upper echelons of Wall Street that discussions within the Trump administration about limiting Americans’ investment in Chinese companies will ultimately lead to nothing.
One top bank executive after another said so when asked in private conversations in Davos last month. The signals they’re getting from administration officials are in part, they say, a result of their lobbying efforts to squelch the idea as something that will only add to market volatility and curb their ability to expand in China.

Moves in Tesla options are making the stock’s wild swings look tame
Tyler Bailey – CNBC
Despite a downgrade from Canaccord taking a double-digit chunk out of the stock Wednesday, Tesla is still in the middle of an eye-popping run. The stock is up more than 30% in a week, over 70% in a month and about 235% in the last six months. If you think those numbers are too big to believe, wait until you hear about the electric-auto maker’s options contracts. “It’s quite extraordinary what we’re seeing in Tesla. I mean, almost unprecedented, I would have to say,” Optimize Advisors President Michael Khouw said Tuesday on “Fast Money.”

Oil flips into contango, indicating months of surplus
Dmitry Zhdannikov – Reuters
The oil market looks set for at least four months of depressed demand because of China’s coronavirus outbreak, with a large crude surplus not expected to clear at least until August, analysts and traders said.
Fears of a virus-related slump in global energy demand have flipped the market into contango this week – a structure in which longer-dated oil futures trade at a premium that encourages traders to keep crude in storage for more profitable resale in the future.

Exchanges and Clearing

Cboe bolsters data business with acquisition of two derivatives analytics providers
Hayley McDowell – The Trade
Exchange operator Cboe Global Markets has made moves to expand its information solutions division and acquired two derivatives analytics specialist providers. In a statement, Cboe confirmed that it has acquired real-time risk and margin analytics provider for derivatives markets, Hanweck Associates, as well as portfolio management platform provider, FT Options. The deals closed on 3 February, but terms were not disclosed.

What to Know About Cboe Market Close
Adam Inzirillo – Cboe blog
Cboe Market Close was created to reduce closing auction costs and provide an alternative source of on-close liquidity for market participants by creating competition around Market-On-Close (MOC) orders. Its approval by the SEC staff after a robust, transparent and public comment period affirms the obvious case for introducing this market-defining innovation. CMC is a product designed in response to a lot of industry persistence and interest in an alternative to the listing market’s closing auction. It’s important because market participants use the closing auction as a liquidity event. Investors frequently use the close to find a buyer and/or seller; and these orders are often sent as market-on-close (MOC) orders, meaning the investor is looking for queue priority and immediacy of execution during the closing auction process.

Last trading day for Index Futures & Options – February 2020 contract

Regulation & Enforcement

Encore | Insider Trading: Finding the Needle in the Haystack
FINRA.org (podcast)
When it comes to detecting insider trading, it really is like finding a needle in a haystack with more than 15,000 different stocks, options and bonds trading every day across millions of transactions. Yet, Sam Draddy and the Insider Surveillance team in the Office of Fraud Detection and Market Intelligence manage to find those needles. The Insider Surveillance team does it by combining a lot of data—20 years’ worth of data on thousands of actively traded bonds, stocks and equity options—with a mix of sophisticated surveillance technology and good old-fashioned detective work.


UBS extends post-trade technology deal with GBST
Hayley McDowell – The Trade
UBS in Australia has expanded a partnership with Sydney-based financial technology provider GBST to overhaul its post-trade processes with increased automation. The investment bank will implement GBST’s Syn~ platform for cash equities and exchange-traded options, and migrate its Australian business to the automation system for more operational efficiencies.


Here’s Why You Shouldn’t Expect Tesla Stock to Calm Down Soon
Dan Caplinger – The Motley Fool via Nasdaq
Right now, the investing world is focusing on shares of Tesla (NASDAQ: TSLA), which has been on a tear the likes of which few have ever seen before. In just the first two trading days of February, the electric vehicle specialist’s share price has gone from $650 to nearly $900, having briefly approached $970 per share during Tuesday’s session. In the process, Tesla has achieved megacap status despite still having posted a loss over the past 12 months.

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