Traders Take Note Of Tesla Into Earnings Report


Simpler Trading Team

Jan 24th 2023  .  5 min read

The current bad news about Elon Musk is that he is stirring up controversy on multiple fronts relating to his latest venture, Twitter.

The good news is that all the media noise doesn’t appear to be holding sway over Tesla, Inc. (TSLA) which is set to report earnings after the closing bell tomorrow.

Simpler’s traders are taking note of Tesla stock and potential trades as the electric vehicle manufacturer – and Musk creation – is on tap for its latest financial picture.

Options with John Carter
Futures with Raghee Horner

Plan now to navigate wobbly stock market

The plan for this week in the stock market for the Simpler Trading team is much like last week.

Wobbly stocks still hold promise to the long side, according to Neil Yeager, Vice President of Futures Trading at Simpler Trading, with an early move upward.

Choppy action today gives pause to any sudden trade executions based on the uptick.

In the market today, the Dow took the top spot among the three major indexes by closing up .31% at 33,733.96 points (adding 104.40 points on the day). The Nasdaq took a step back, dropping to 11,334.27 points for a .27% loss while the S&P 500 stumbled by .07% to 4,016.95 points.

“Long story short, we wait for the retracement to add or engage with largely the same bias as recently discussed,” Neil told the Simpler Trading community, while keeping an eye on the E-Mini S&P 500 (ES) index futures.

“It really has found its footing and traded nicely higher,” Neil said. “Do we think we still like it for higher? I think yes.”

He is still waiting to see what the next pullback does before committing to longer term plays to the upside.

“At the end of the day, I’m still trying to hold onto more to the upside in both price and time,” Neil said.

His caution is spurred by the Federal Open Market Committee meeting next week and how high the central bank will raise the federal funds rate.

Will Tesla hold higher price through earnings?

One stock the Simpler team is watching closely this week is Tesla.

Even with all the Musk mania in the media, Tesla had a large bounce higher on Monday to add to its bounce from a key level early this month. This makes it a stock worth noting going into the earnings report tomorrow, according to David Starr, Vice President of Quantitative Analysis at Simpler Trading.

“It has now reached the first important hurdle above,” David said. “It will hold the clues for what comes next.”

As the stock price reaches new levels to the upside, traders can begin to see a stronger pattern using stock chart technical analysis. David daily uses Fibonacci levels and Voodoo Lines® in his chart analysis.

“It’s a way to benchmark what are generally, relatively systematic moves from level to level to level,” David said. “We don’t know what it’s going to do, but we know some signs to look for.”

David sees the $144.79 price point as an important level to watch for continuing higher or hitting resistance. If Tesla turns downward, the ticker could move more bearish, especially if it moves toward $108.

“So far Tesla has been respecting the levels,” David said, noting that the stock is at an important decision area and much can be learned about what is ahead based on the stock after the earnings report.

Multiple options for trades on Tesla earnings

Any trade that holds through an earnings report takes on a new level of risk. There is just no way of knowing what will happen once the company data is released.

Allison Ostrander, Director of Risk Tolerance at Simpler Trading, walked through several Tesla trade ideas for consideration as earnings approaches.

She is seeing some consolidation in Tesla heading into earnings with moving averages as support, but is maintaining stops on any upside trades while watching for resistance if the stock pushes to $150.

Allison pointed out that Tesla last year had some big ups and downs in price around earnings reports.

“Sometimes there is volatility to where it doesn’t come back to that prior close the day before, sometimes we have volatility but it goes right back into the chop it was in before the announcement, and sometimes we don’t get that volatility at all,” Allison said.

Ahead of Tesla earnings tomorrow, she is looking at multi-leg setups for any possible trades. If price looks to consolidate she could consider an iron fly or if price appears more directional she could consider a broken wing butterfly. In her setups she tends to keep the trades on the conservative side.

“Whatever risk you put out there where you hold through earnings, be mindful of your capital risk and be OK losing 100 percent of that capital risk,” Allison said.