Tesla - Short Squeeze Or More To Come?

Okay, very good morning. It is Wednesday the 5th of February. Don't forget, if you are watching this on YouTube, to subscribe to the channel for our daily updates and live events that we'll be covering. But getting straight into what we're looking at this morning, a quick update on coronavirus of course, but we're going to have a look at Tesla. I'm sure you would have read the headlines by now or seen the stock price movement yesterday, but we can have a quick conversation about that. I'm also going to talk about oil prices given the, the technical meetings that's been happening with the OPEC+ countries and where does that stand at the moment. We're also going to have an update on the caucuses in Iowa. What's the situation there and is it important for markets? And there's a couple of corporate earnings coming out of Europe to be aware of this morning— BNP Paribas, Siemens, and, and the like. Starting off though, before I go into the graphics aside of me at the moment, let's just have a look at the overall sentiment on charts as we reside this morning. And the Dow finished up about 400 points yesterday, so the impact, or fears if you like, of the coronavirus seem quite a distant memory in the rearview mirror nowadays. Albeit we continue to remain somewhat vigilant and monitor the situation, but for the moment, the fact that it seems to be still somewhat contained to the borders of mainland China seems to have downplayed the situation for the moment at least. And the fact that it hasn't turned into a full pandemic as yet has been welcomed by the market. So elsewhere, just having a look at things, oil prices have been just steadying out overnight. The ellipse that I've got on my chart here signifies the release of the API crude oil inventories, of which we had last night, which I will show you the numbers shortly. But that was when we defined the kind of low point. We saw a bit of a pickup overnight in Asia and probably a move in sympathy because Asian equities actually saw their first back-to-back rise that we've had since the virus outbreak begun about 2 weeks ago. So Asian markets continuing to pare back, Chinese markets specifically, from those heavy losses that were seen on the reopening of trade and that big gap down we had at the beginning of the week. So in tandem, a little bit of a relief for oil prices, but that doesn't detract from the overall trend, of course, in oil, which as you can see here over the last couple of days has been lower. On a daily continuation, this was that chart we were looking at yesterday. So if I quickly just remove one of my camera feeds here so you can actually see the full chart. So this encapsulates then much more of the bigger picture looking all the way back to the end of 2018. So really a good 2-year snapshot of price movement in oil to give us the kind of extremities of the highs and lows of the range from trading north of $75 to down to $42 and where we are at the moment. Now, we talked about this a little bit yesterday, but you can see the various annotations on this chart, and you can see the impact that coronavirus has had on the demand, which we've discussed many times. The question mark, of course, with oil prices really from here is, is what OPEC+ are saying enough to mitigate this downturn and cause prices to go back up? Now, This time yesterday when we were talking, prices looked like they were rebounding slightly as some of the rumors were swirling about the potential 500,000 up to 900,000 barrels per day cut. But seemingly this morning, according to the press, Russia and Saudi, the two main players within that pact, are at loggerheads. And what's the best step forward? Obviously, for Saudi Arabia, if you think about it from a fundamental perspective, They've got a long-term plan to implement in their Vision 2030, which requires them to diversify the economy and their revenue streams, which means that they need a high degree of income because their kind of break-even point, if you like, for their, for their government spending has increased. So they would like prices definitely much further north, whereas Russia doesn't have quite the same kind of pain threshold on a price point. And so they, the latter, being a little bit more reluctant to just pull the trigger and cut supply just yet. So we continue to monitor that quite closely. Otherwise, the other assets, gold up a little, recovering from some losses that were seen late yesterday just after we had that big push-up on Wall Street. Obviously a pretty firm finish across the major indices. And if I was looking at T-notes, pretty similar story. I wouldn't say the gold and the T-note move being up $10 and 6 ticks respectively is a form of the kind of risk appetite for this morning. I just think it's a bit of a natural retracement from some of the move with some profit taking on the shorts yesterday in gold and a 10-year. Currency markets, the, the Dixie's just taking a bit of a, a knock more recently as Europe has come in. So as you can see, EURUSD and cable on the top left looking a little bit more perky this morning. I'll leave Sam to go over the technicals, but from a fundamental point of view, there really hasn't been anything that I've seen regarding the UK that would be particularly— that you could pin the strength that we're seeing at the moment here in cable. Uh, just having a quick look though on this cable chart, just in regard to the highs that we were seeing yesterday. So we're just testing that at the moment, and you can see there's some previous other points of, you know, just quite obvious from support resistance point of view where we are at the moment. So be interested to see how we play out. And, uh, just quite interested to see as well, as I said, Sam's going to talk over this more, but Let's have a look at that fib retracement of where we are at the moment, and we're right on the 38.2 here, which was yesterday's high. So pretty significant point here. If cable can get above that, it might well open up a little bit further more upside, but we're just seeing around the first test of that right now, that fib retracement from the high that we had at the, the day of Brexit, but then the gap down as the red lines were drawn and that big sell-off that we had on Monday and the prevailing low that was seen yesterday. to where we are right now on that reversal. So worth keeping an eye on from a technical point of view. All right, well, let's get stuck into some headlines and then the guys can go over the technicals. But coronavirus— not going to spend too much time on this. I think we're all aware now of the current way of which markets at least are looking at this situation. And so despite confirmed cases now heading to 25,000 just shy of 500 total deaths, the market not being spooked by this. And I'd say it's kind of dropping away a little bit in the macro order of driving forces at the moment. The one thing, of course, that most people were talking about yesterday was this. I'm sure you would have seen the tweets and people banding around images of a certain company share price, and that was Tesla. Uh, so Tesla has had a monumental, uh, year so far. And let's not forget, we're only in beginning of February. By the time the market closed yesterday, the stock, even though it saw a big fall right before the close, the stock is still up 112% on the year. And, and if we actually have a look at this, so, so let me just be clear about this. We're— we've had one month of the year and the stock is up 112%. This isn't like year-end, this is one month in. So given what we've seen here, and if you'd have a look at this chart, this overlays, uh, 5 different auto manufacturers. The other 4 you'll be very familiar with, of course: Ford, General Motors, Toyota, who's the big monster out there in terms of the actual size and market cap, and then Volkswagen. But if you actually look at Tesla, which is the black line at the bottom, and what January has added to the company, to put this into some other terms, their market value now is greater than all 4 of those, or all 3 of these other companies put together, that being General Motors, Volkswagen, and Fiat, if you were putting it that way. So yeah, just quite incredible really. And to maybe look at it in a different way, This is what the stock price looks like over the last 3 months, and it's just, uh, quite incredible. If you look at it year to date over the course of the last month, then, you know, we were trading at $4.50, uh, we did get up, uh, kind of around $9.50 yesterday before— just before the close, you might have seen this happened, uh, a move that knocked $100 billion off there, um, or $100 $1 off their share price at that point, and it came about 10 minutes before the close. Reasoning behind that— there isn't any. But this is the nature of when a stock rises as fast as it has done. What are people attributing this move to? Well, I would say it's predominantly a short squeeze. I think if you were listening to the media not that long ago, there's a lot of big money out there that were shorting Tesla And so inevitably then, when the stock starts rising as it has done, there's a lot of people out there feeling the pain and losing a lot of money and having to bail on those shorts. And then inevitably you get this big squeeze higher, and that knocks out other people, and then it just gets really exaggerated. It's the mother of all squeezes, if you like, of what we've seen. Uh, from a more technical point of view, I guess record revenue numbers by the company in recent earnings, the opening of a new key factory in China. If you remember, they've made quite a close tie with the Chinese government as well. And then a degree, I guess, of a little bit of the fear of missing out, people just jumping on, wanting to ride it up, a little bit of the Bitcoin mentality, I'm sure, also coming in and just leading to this, this movement. Overall, what do I think? I mean, look, I'm not a single stock picker by any means, but the way of which this share price has risen would indicate then, if history is any guide on other similar stock price movements that you generally see, when a stock has risen that quickly, 40% almost in 2 days, it's got to come back at some point. And when it does, it's going to be fairly violent, albeit the shares will still probably remain highly elevated. And for the year A move of this magnitude of 40%, you would say it's probably reaching a top. And psychologically, obviously, we've got close to $1,000. Um, you probably would have seen on Twitter, I had a text from my brother last night reminding me that he bought Tesla at $250. He just wanted to rub my, my nose in it. Uh, but, but, and, and then just to boot, I told him, you, you should get rid of that. And he got rid of it right at the very top. What a jammy guy he is. But hey, that's just the way the cookie crumbles, I guess. But moving on away from Tesla, so for oil prices, as I said, I've really covered this story with that quick look at the crude chart already. We did see a moderate rebound yesterday, but I think it's quite telling that prices have come back quite a bit from those highs yesterday. And that to me is the market kind of testing the, the will, if you like, of OPEC+ and trying to call their bluff. Because, you know, as I've mentioned before, the usual staggered approach of, of what they do is they try to verbally intervene, intonate towards taking some kind of action before they actually do. And I think the market sees right through that these days. And so if we have another test and a push down, and particularly we've got the oil inventories coming out later, and if they're bearish, I think we do see another down day at the moment. And that's just really, I think, speculators going to push the price knowing that we can open the trapdoor somewhat if we can break through the previous low seen a day or so ago and really test the resolve of OPEC, who I don't think are really going to step into the market and aggressively cut supply unless we get down to around the $45 region. We did have the API crude oil inventories last night, and this kind of sets the stall then for what to expect from the DOE. The crude number was bearish in the sense that the build was bigger than anticipated, 4.18 million against the expected 3 million. Cushing, a build just shy of a million. Gasoline, just shy of 2 million, also slightly larger than expected. Distillates was a draw of 1.78 million. That data, of course, coming out this afternoon at 3:30 London time. And we did have the results come out. I believe his name is, is pronounced Buttigieg, leads in Iowa caucuses as delayed results unfold. You remember there was those technical issues yesterday getting the results out, but this, this chap has basically come out of nowhere and he's beating off all of the main contenders. Bernie Sanders is a close second. Elizabeth Warren, then Joe Biden lagged in 4th place. I've not really read too much about this Buttigieg gentleman other than he's pretty much the Antichrist of Trump, being the fact that he's a homosexual, he's very much of a political stance that would be opposing that of the kind of aggressiveness of what Trump has been saying on various different key issues. And I guess that when you have someone like Trump who's, you know, quite almost polarized in his view and stance that he has, then the natural recourse for that normally is you get an absolute opposing force become quite present and quite an ability to catch sentiment because of the almost division of which someone of Trump's approach creates. And so this seems to be the natural reaction effect here, and definitely this chap has taken out some of the more kind of regular contenders that we're used to hearing. So definitely one to watch. But going forward in terms of the session and the days and weeks ahead, I mean, the markets don't— do not care about this for the moment. We're but let's just be clear, this isn't a market-moving factor, so I'd leave it to the side for the moment. The other thing as well that, that's quite interesting is that I believe he's a— he was ex-army forces as well, so definitely ticking a lot of interesting boxes that would be quite the, quite the opposite of Trump, and to give them quite a clear alternative in a divisive vote if there were to be one. If the two were in fact to lead out against each other, it would be incredibly interesting. From the earnings perspective, a couple to be aware of. You've had Siemens— their actual shares were down a touch this morning. They posted weaker than expected first quarter industrial profit. They were down just short of 2%. We have had BNP Paribas, one of the bigger French stocks, report. They keep pace with Wall Street as trading rebounds. Bank slightly cuts profitability targets amid falling rates. Just having a look on the kind of scoreboard, can't see the actual initial opening prices, but a few others— initial movers Vodafone up about 2%, Adidas down about 2%— are some of the movers and shakers this morning. But overall, not too much there to really force things. But do bear in mind that Siemens is one of the largest companies in the DAX. So it could act as a bit of a, a tailwind for the, the index this morning. Looking at the calendar for today, the European morning fairly quiet. The, the PMI data we're going to see is the final readings, so these shouldn't then by default be too market moving. If anything, looking at the currency markets, looks like a little bit of dollar movement with both those major pairs moving a little higher at the moment. But US afternoon, certainly things— well, before I get to the US, UK services PMI is coming out at 9:30. Now that one, that will be one to watch. And the reason for that is that actually we've had about a pretty decent bounce in the PMI data out of the UK for manufacturing in particular. And that coming on the coattails obviously of the kind of positive feed-through from the majority government, from the election that we had at the end of last year. The service number really is the key of the three, given the, the way our economy is structured and its dependency on services. So that's coming at 9:30. Markets are expecting basically an unchanged reading from previous, but we do have a range of 52.4 to 53.5. And as per usual, remember what we saw, um, I think it was some, uh, the head of the Bank of England, there was some very suspect price movement coming just before the, uh, the announcement of their unusual split that they had on their decision to hold rates. I'd just be mindful of keeping an eye on sterling going into this data point if we see any other kind of erratic price movement going into it. But bear in mind, the pound has already been fairly bid this morning, so if we did get a strong number, perhaps that is enough to help us break that technical point of resistance, which you can see the market is respecting at the moment. So that fib level with yesterday's high, uh, is just holding proceedings at the moment until that number comes out, I would imagine. Having a look then into the US session, we've got a couple of key economic data points, actually really 3. ADP National Employment, so that's the first one up. So this often acts as the precursor, of course, for Non-Farm Payrolls. So this is private payrolls, and the report is based on actual payroll data of about 24 million employees. So it's seen as a fairly weighty precursor for, for Friday. And the last number that came out was 202,000. That was the most since April in the last reading that we had, and it was way above market expectations. For today, the headline is expected to pull back though to around 156,000 from, from 202,000. And then later we get the ISM non-manufacturing. Remember what we had beginning of the week? The manufacturing sector was a great number, smashing estimates and putting the first expansion of the manufacturing sector in 6 months. So the non-manufacturing number is going to be closely watched. That's expected to remain unchanged though at 55. And this is what that pattern of the last 12 readings looks like at the moment. I'm sure you probably would have caught some of the State of the Union address, the one the president gives on an annual basis. He was very much talking up the economy and how, you know, as a validation of his policies and the work that he's done since he came into the White House. Obviously didn't talk about the fact that manufacturing activity had slowed remarkably over the course of the last year or so with the trade war with China. However, these recent data points, particularly at manufacturing on Monday— it'll be interesting to see if these other two can follow suit— have rebounded sharply. And so if that is the case, well, all the more valid he can be in kind of banging that drum for his political agenda. Uh, from a corporate earnings perspective, a few things today. Pre-market, Merck, General Motors. After market, one of the bigger firms would be Qualcomm, those kind of more social media sensitive type names like Twitter, Pinterest, and one of the recent IPOs, Uber, all coming out tomorrow. All right, that is it for me. Gonna hand you over to Sam, so gonna come off the mic. Let me just switch a few things over. He's heading over now. Here he comes.

Yeah, hi guys, good morning. I hope, uh, we're doing well. Yeah, euro and the pound is catching, uh, the hot air balloon to the upside. A bit of, uh, reaction now you would expect to the pivot. Some resistance from overnight, some lows from yesterday. To come in in that euro. It's a bit of a zone. I've got it marked up in the, uh, the other room that I've just been in, and, and you can see the low to the high and the pivot. It's, uh, it's a pretty nice area where if you were looking for a bit of confirmation to go short, this could be the, the point where that could come through. You can see the importance as well just having a look here at the, the lows that we had from this morning, from yesterday. And then Monday as well. So 3 tests of that low. That's another opportunity should you actually rather the continuation, a break of, of that level to come back in to go short, uh, really targeting the low that would be on, uh, on Friday the 31st. Was it the 31st, the Friday? Uh, yes, it was. Yeah, so that could be a little opportunity there. But you know, let's not, you know, hire that the The dollar is weak today, so if we get a break of this level, I think the, the obvious targets would be towards that pivot point where I know a couple of guys were short yesterday from here in the morning, and that was obviously a, a decent trade back down to towards that S1. It may perhaps painfully slow, but still a good trade and good opportunity could come from that area again. So the, the euro just under or the dollar, I should say, just under a bit of pressure in early trade. But I think if you're remaining of that short bias, this pivot, this trend line, the highest from yesterday, the lowest from yesterday morning, it's a pretty key resistance point. But of course, you know, if you've been short over the last couple of days, a break above that, you might just be put off a bit going forward. So those would be the main zones that I'd be focusing on today. To the downside, those lows. To the upside, pretty much where we're trading now. and then towards the R1, yesterday's highs, uh, in that mix as well. Having a look over the pound, yes, pushing higher. Yes, you've got the data out in, in a moment. And actually, against quite a few, uh, of the, the crosses, the pound has broken some nice levels where, uh, it could well be a bit of a retracement to come in. It's just whether you really want to take that risk on before, uh, the data point, uh, at half 9 or not. But you can see the importance of this level here that Ant was talking about, uh, earlier on. So yeah, keep a watch, uh, just for those other pairs. A lot of them do look like this, and that we had pushed higher, uh, this morning and trend lines had been broken, or key horizontal, uh, support or resistance depending which way, you know, you're looking at, whether Euro/Pound or Pound against whatever market. So potentially later on, just having a look back for these kind of areas here to come back into play. Breaks of trends or those horizontal, uh, support resistance points for the continuation of a bit of pound strength should that come in. You can see the importance of that level here. It's, uh, resistance— I mean, support from last night and this morning with the pivot. That's, uh, the zone that I'd be looking at to the downside if we were to have strong numbers, uh, for the, uh, the pound. Looking here against USD, where could be some nice targets? Well, I know we, we went through it quite quickly on Monday, thanks to Boris, um, but here, just looking around that, just above the R1, it's a bit of a, bit of a zone up towards that 131, that the lows from Thursday evening, Friday as well, uh, just around that point I think would be a pretty good line in the sand. And if it was to push on as well, you can see 131.10, some nice price action around there. So worth keeping a, you know, watch on what pound— the pound does for the next hour. Data has certainly seemed as though it's been leaked. The Bank of England was obviously leaked, and you've got someone at the, the press conferences, a certain Squawk, that are releasing the— or they've got telephone lines to traders. So yeah, if it goes higher, you can presume it's going to be, be better. So maybe that opportunity comes if, uh, if it's worse than expected. Just kick out the corner of my eye here, you see the, the stocks in the US pushing higher. And, and this is important because we're not far away, uh, from coming to some very important levels here in the Dow. Just those highs from last week and, um, the, the sort of the gap fill never really happened on the Dow futures. It happened, yes, on the S&P. And you can see we're coming up to, uh, that high from yesterday, which was almost that point from the 24th. So really keep a watch on this, uh, above 3,300 on the Dow. The NASDAQ as well just catching a bid and pushing, uh, there. Let's have a quick look over, over that there. The, the Dow on, uh, a new all-time high. Coronavirus, coronavirus. But yeah, the, the S&P and the Dow, a bit of catch up today. Do, uh, but worth just keeping an eye on, on how this reacts, certainly to the S&P 3305, uh, in terms of levels to perhaps get back in should it retrace. Because obviously you don't really want to go chasing this market for now, but you can see we broke above this trend, came back to retest it. That's almost what I want to see from the pound later on, but for the S&P, 3 points until you get to that high, uh, if that is to continue. I would say you've got to prefer the short in, in gold. And you know, whether you're already in this here, I mean, what a level pullback from yesterday was the low before we broke through, 1565, 1666. I know a couple people were looking at that trade as well. If this picks up and S&P and equities go higher, well, gold has to come lower, which it is doing so now. It's not one where you jump in right now though, because of course you would like that, that stop to be to be above that pivot. So if you're going in, the next opportunities are, of course, on maybe some more confirmation around that area, or a break of this key trend. And you can see you've got your free test, 15-minute, or appear on the, the 60-minute as well, where it would look to come in a previous high of the day. So it's a really key level around 1560 where the next opportunity could come for gold, if that is to break through. Some really nice, uh, trading yesterday in gold. It has be said, where trend lines are broken, you got them retested, previous levels of support came back into play to act as resistance for that final push lower. And, you know, I have to say, this market over this, this year has been incredibly resilient to any push higher in equities. But if, you know, the coronavirus, etc., can't kill stocks, well, gold, you would imagine, has to perhaps come down a bit, especially if some US data starts to improve. I think actually Non-Farm Payrolls on Friday could be slightly interesting. Anyway, back to the market at play. A break of that trend interests me. Key levels to the upside around that 1568 level, previous low of the day, basically S1 from yesterday, uh, as well. If this trend line goes, I don't see much stopping it really. Obviously you've got other targets to go into play, but that low that we had from yesterday as well, and you can see why that's important, was also the low from the 21st as well. So one to keep an eye on, especially if stocks can push higher. Quick look over at the Aussie, uh, shout out to a couple people in, uh, in Stage 2 that took this trade. And we were saying when we're eyeing it up, it was just like, is it actually too easy, this trade? They got the 50% fib, you got the R1, you got the previous high of the range that we couldn't get out of 1, 2, 3, 4, 5 times. Came back and, well, what a trade indeed. And it's now on the, the high of the day thanks to a bit of dollar weakness as well, thanks to stocks pushing higher. Have we seen the low for the Aussie for the short term? There'll be arguments for yes, but of course, if you do believe that this market, uh, still has some way to go to the downside, that the bushfire impact has not been completely priced in, there's, you know, some decent levels. Let me just get rid of this fib here to, you know, hurdle, should we say, that it's got to get through, uh, to confirm a push higher. You know, you could argue up towards that 6836 level could be a nice place to get back in, uh, for this trade, uh, on that sort of break that we had on the, the head and shoulders area. I know it was a false break, but once we did come back down, you can see it was a pretty clean move. So keeping a watch on there, that would also be, if I was long one of my targets after we get through maybe the 68 handle, uh, that the 10th of December low. So Aussie, nice couple of days, looks to be continuing for now. The dollar weakness helping euro push higher, but that's a key zone for sure around that pivot. Uh, the pound data coming out in less than an hour. Everything to do with the pound seems to be leaked at the moment, so just be careful. Stocks pushing higher will help bring gold back lower. You would imagine. Hope everyone has a good trading day. Any questions, please do let us know. Could be another interesting one.