Tesla (NASDAQ: TSLA ) stock is a day-trader's dream. TSLA stock is highly volatile. It always responds dramatically to headline risks, and Tesla always finds itself in the headlines. Thus, you constantly get big swings in Tesla stock price. Also, the stock has some pretty well-defined technical levels which lend themselves well to buying dips and selling rallies.
Today is no different. Revelations came out this morning that the U.S. Department of Justice has requested documents in reference to CEO Elon Musk's now infamous "funding secured" tweet. And TSLA has plummeted 7.7% in just a few hours over the news that Tesla now faces a criminal probe. This is in addition to the already known SEC probe over the tweet .
Having said all that, Tesla stock is also a long-term growth investor's dream, if you believe in the growth narrative.
This company is pioneering a new era of mass-market electric vehicles (EVs). They are miles ahead of the competition in terms of mass-market EV production and technology, and Tesla is considered the top brand in the EV space. Thus, you have a company with a first-mover's and branding advantage in a secular growth market. Also, the company is on the verge of becoming consistently profitable, a prospect which could inspire a short-covering rally that sends shares to $400.
For all these reasons, I'm long-term bullish on Tesla stock, but follow the day-to-day patterns to know when to buy and when to sell to mitigate near-term risk while I wait for the long-term thesis to play out.
Those patterns are screaming sell now.
But, I also think the fundamentals are screaming buy in early October, before the company releases what should be really good Q3 delivery and production numbers. Thus, the thesis is simple: sell in September, buy back in October.
Why Tesla Stock Looks Doomed For Near-Term Pain
My most recent article on TSLA detailed why early September was a good time to buy the stock.
Headline risks had largely passed. Signs were pointing to Q3 numbers being quite good. And, importantly, Tesla stock had held a well-defined bottom at $250, and reversed course to trade sharply higher. That told me that Tesla stock had runway to its next key technical level, $300.
Now, though, things have changed.
Tesla stock did run up to $300. The last time Tesla stock bounced from $250 to $300, the stock proceeded to fall flat, and dropped back to $275 within a month. Thus, history says that the rally to $300 should fade, and today's headlines tell us that it will be soon. The headline risks are back over reports of Tesla facing a criminal probe. Renewed headline risks along with weak technicals tell me that this stock will likely be weak until the next catalyst arrives.
The next catalyst won't arrive until October with the Q3 delivery and production report. Until then, headlines and technicals will drive this stock. Right now, the headlines and technicals are bad, so I see Tesla stock being weak into the end of the month.
October Could Be A Game-Changing Month
Although the rest of September might be bad for TSLA, October could be an entirely different story.
Tesla should report Q3 delivery and production numbers at the beginning of October. I think those numbers will be quite good, if not spectacular. Musk wrote in a letter to employees that Q3 is shaping up to be a record quarter, and that the company will deliver more than 80,000 vehicles (double the amount in Q2), a number that would drop jaws on Wall Street.
Meanwhile, Musk's brother and Tesla board member, Kimbal Musk, recently appeared on CNBC and said that it is going to " blow people's minds " how many Model 3 vehicles will be in America within the next few weeks. This claim is supported by the fact that Tesla appears to have produced a ton of Model 3 vehicles and is now shifting the focus from production to delivery, as evidenced by Bloomberg's Model 3 production tracker which shows that the 5,000-plus vehicles per week rate has dropped recently and a Musk tweet that says company has shifted from production hell to delivery hell.
I think the takeaway from all these data points is pretty clear. Tesla finally figured outs its production problems in Q3. They accelerated Model 3 production to a weekly rate of over 5,000. They hit their target production numbers, and are now dialing back production to focus on delivering all the Model 3 cars they've produced. This has created some issues, but delivery is a much easier problem to solve than production, so near-term delivery issues should fade and Tesla should deliver a bunch of Model 3 cars before the quarter is over.
If all that is true, then Tesla's Q3 delivery report due at the beginning of October could be very good. Strong Q3 delivery numbers could cause a panic in shorts, who will rush to cover. That could spark a big rally in Tesla stock. Then, if the company manages to report a profit in its Q3 earnings report at the beginning of November (which seems likely given robust delivery numbers), this stock will likely do what it did the other two times the company reported a profit, and that is soar to a new permanent high.
Bottom Line on TSLA Stock
Headline and technical risks are big in the near-term - especially with Tesla's criminal probe - so TSLA stock is a sell until the next catalyst arrives. That next catalyst should arrive in early October with the Q3 delivery report, and that report should be quite good. As such, Tesla stock looks like a sell now, buy later situation.
As of this writing, Luke Lango did not hold a position in any of the aforementioned securities.
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The post Ditch Tesla Stock for the Rest of September, But Buy Back in October appeared first on InvestorPlace .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.