Go Make a Name for Yourself (TSLA, GLD)

Executive Lounge, Options Trader Elite / Tuesday, November 11th, 2014

We received word just over 24 hours ago that the Bank of America/Merrill Lynch market technician’s team declared an immediate end to the precious metals bear market.

The man responsible for the daring report has no first name. He goes by the moniker MacNeil Curry, and apparently because of that injustice (parents can be so cruel) he now feels it necessary to make headlines and prove that he’s worthy of being a Rory or a Mel, or just a plain old Dick.




What, pray tell, made the nameless one consider such a call?

Macneil explains that last Friday’s action in the gold pits produced a ‘bullish engulfing pattern’, a Japanese candlestick pattern that bodes well for gold.

Curry spices up his call by adding that BofA/ML is “switching gears on gold from bearish to bullish,” and that “Friday’s gains are just the beginning.”


The only problem with Dick’s prediction is that there was no bullish engulfing pattern, either on the chart that he provides (below) or on any other chart of gold that we’ve studied since receiving the yellow one’s report.

This is the chart he offers (our comments are in red) –


The lad suffers from more than just an identity problem, apparently. He has vision issues, too, may the good Lord help him.

There is no engulfing pattern here whatsoever because the body of the latter candle does not fully engulf the former. If Signor Curry believes that the shadow of the latter candle is also able to engulf, then he’s invented a new method of reading Japanese candlesticks, and we wish him all the best with it.

In addition to that very big booboo, we’re not sure an engulfing pattern can be applied against action that occurred two days prior – as he seems to be doing. We’re still checking the matter with several of our far Eastern mentors, but it appears to be another case of an errant stab at the bear, and one that likely won’t cause her much damage at all.

Needless to say, yesterday’s bearish move in gold brought the metal back near its bear market lows, proving once again that long-shot call by as yet to be named technicians that are based on dubious analytics should be given immediate ‘file 13’ treatment.


But it doesn’t end there!


This same MacNeil Curry (if that’s his real name!) has the audacity to bring a second chart with all sorts of scribblings (below) that allegedly confirms his newfound bottom in gold.

It looks like this –


Ours are the red lines and commentary in all-caps.

His is the fancy charting program that unfortunately doesn’t inform him that a one year pennant pattern broke down last month (in red), bringing gold to new bear market lows and pointing toward further losses.

How the man gets a bull read here is simply mystifying.

In Short, Stay Short


We like the stock market about as much as we dislike the commodities at this stage, but every dog has his day, and even the MacNeil Curry’s of the world will one day make a name for themselves.

In the meantime, it’s the equity market where the big gains lie.

Look here –


This is a chart of third quarter earnings beats for the world’s four biggest markets.

As you can see, the U.S. and U.K. are leading the recovery in the industrialized west. Over 83% of Britain’s big-caps have beaten analyst expectations this quarter, while a solid 80% are ahead in the U.S., the highest such read in four years.

That bodes well for equities going forward, particularly for the riskiest stocks – the high fliers and the crazy momentum plays, which always fire higher when the market is stoked.

Such as… ?


In our view, the craziest stock on the market is without question Tesla Motors (NASDAQ:TSLA), a company whose shares we’ve played several times in the past for big gains, and one we’re ready to soak again today.

The firm is run by a man equally deserving of a new moniker (where are the Dicks when you need them?). His name is Elon Musk, and he’s proven himself a better attention-getter than our aforementioned spicy friend from Merrill Lynch. He’s likely a whole lot richer, too.

His company’s stock, however, is very volatile, and guessing which way it will turn next – even while the broad market is advancing soulfully – is not an easy project.

Tesla’s daily chart shows several gaps that will have to be filled, supporting the bullish thesis for the stock.

Take a look here –

Should the stock move higher to fill those gaps (red circles), we’ll see a minimum of $255 for TSLA, and possibly $280.

But the truth is, we could just as easily get some selling here. TSLA has been clinging feverishly to her 137-day moving average for almost a month, a development that gives us pause about the stock’s bullish prospects. Strong equities generally bounce off support. Tesla apparently wants to ride it for as long as possible. That could mean a stair-step drop to the next major line of support at the 274 day moving average, currently at $208 and climbing.

Support for the bearish thesis is also provided by the RSI and MACD indicators, which have fallen from an overbought reading (in blue) in early September and continue to struggle to retake their respective midway waterlines (black boxes).

Weekly Proof


A look at the weekly chart is also inconclusive. Because while the stock has certainly been making higher highs and higher lows (red circles, below), RSI and MACD have been diverging from price for over eighteen months (in blue), and the former is just a week from submerging below its all important waterline.

Take a look here –

All told, a break lower is equally possible.

So we’re going to be prudent here and play both possibilities using complex calendar spreads.

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Options Trader Elite recommends you consider the purchase of a TSLA January 280 CALL for $3.60 and a January 200 PUT for $3.30. At the same time, we recommend you sell the November 28th 280 CALL for $0.18 and the November 28th 200 PUT for $0.44, and also sell the December 26th 190 PUT for $1.03 and the December 26th 290 CALL for $0.78. Total debit for the trade is $4.47.


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Options Trader Elite recommends you consider the purchase of a TSLA January 280 CALL for $3.60 and a January 200 PUT for $3.30. At the same time, we recommend you sell the November 28th 280 CALL for $0.18 and the November 28th 200 PUT for $0.44, and also sell the December 26th 190 PUT for $1.03 and the December 26th 290 CALL for $0.78. Total debit for the trade is $4.47.



Watch those expiries.

And expect a move soon!

With love of the hunt,

Hugh L. O’Haynew, Senior Analyst, Normandy Research

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