Vantage Point - Part II

Kim replied in defence, "I am just a summer intern. You can't expect me to have a portfolio up and running yet. But I do pick stocks for my dad's investment portfolio. He is not at familiar with American market. And he added Tesla six months back upon my suggestion. He is not a frequent trader like you. He can hold on to his investment for years. So my view is long term upside for the stock." Navin said, "Well, I trade a few swing positions. But that's not even 20% of my portfolio. My positions are for the medium term. I did buy Tesla a year and a half back at $180. I sold half of my holding when it touched $300. And now I will decide whether to completely exit or not depending on the results tomorrow"

 "Smart lads both of you", said Alex in a beaming tone. "This is the beauty of trading or investing. The same figures and facts lead to so many different interpretations. And whenever someone goes long with utmost confidence in the future price movement up north, there is an equally confident person at the other end of the trade going short, with an exactly opposite view. Only time will tell who is right or wrong", said Alex with a smile. 

The full year results of Tesla for 2017 were out on the evening of February 7th, 2018. By the time the boys returned home after work, they had managed to track the exchange websites and have a quick glance at the financial numbers. It didn't look positive. Alex as usual for the first at home. He was already analysing Tesla charts on multiple time frames. The stock had gone up 6% in the last two days anticipating results. But the results turned out a bummer with even bigger losses for the electric  car maker. Kim and Navin had also reached home by then and gathered to have dinner. Alex had already ordered Thai Wok for all three. Navin was beaming, naturally as the results weren't great for Tesla as he had envisaged. "There you go fellas. You mocked me yesterday as if I had thrown nails on your Tesla highway. What's your take now?"

"Well, I have to admit the numbers are down. Investor sentiment will take a hit and I won't be surprised to see the stocstk falling tomorrow. Yet, as I said earlier, I will wait to see the price action tomorrow before deciding any position," said Alex indifferently.  Navin remarked snidely, "It's always smokes and mirrors with you big trader boy. What about you Kim?" Kim stuttered a bit, "Yes the numbers are bad. I guess I will let my dad's money work the long haul like him and myself like to do. No change in status yet. I won't suggest him to reduce or exit the holding now. As I said my dad can wait for years." Navin retorted, "Hope that turns out well for your dad Kim. I would advise you to reduce holdings. But it's your decision at the end of the day.  As for me, I have decided to sell off the remaining shares I have tomorrow, before it goes down anymore". Alex interrupted, "I would still wait to see the price movement for next couple of days before taking any panic action." Navin replied, "Well half the value of the stock can wiped in a couple of days of panic selling. I am not taking the risk"

Once the opening bells gonged in Nasdaq the next morning, Tesla opened positively up 1.3% in the first hour of trading. Then it started reversing slowly, the hourly candle alternating red and green. Once it broke the day's opening price, there was no turning back.  At day end the stock had lost 8.3% of its value and closed at $315. On that evening , when in flat 202, West 54th apartment, 10th avenue, Hell's kitchen there was one face smug with the "I told you so!" look. It was Navin's. He didn't miss any opportunity to point out to his fellow mates how right his decision was to sell the stock. Kim was quiet looking down most of the time. Alex was his usual nonchalant self, though irked by Navin's cocky remarks. Navin was so high with confidence that he even took fresh short positions in Tesla's 1-month futures contract. The next day, the stock went down to break $300 and Navin was ecstatic having made some quick money. "It's gonna reach $270 for sure, the fair value as I told you!" said Navin. Alex replied calmly, "Hold you guns bro. I have no idea about your fair value number. But I see buyers getting active again in the charts. You should exit your short futures position soon." Navin didn't let Alex complete his sentence, "No way in hell, I am not covering before I see $270. And it's gonna happen soon."

The next trading day the stock closed above $300 and it hurried up to $360, about 22%, in the next five trading days. It was Alex's turn to say, 'I told you so'. Navin was wrecked. His euphoria just a week back had now turned to despair so quickly as he burned a deep hole in his pocket. Alex had caught up with the trend early, and as always, bought low and sold high.