Skip to content
Subscribers Only
Investment Alerts

No need to buy Tesla or any shares until Coppock turns higher but when it does ……!

August 25, 2022

Coppock has been amazing for Tesla. There have been two buy signals in early 2013 and December 2019 respectively. Each has been followed by massive share price rises. Presently Tesla’s Coppock is falling and is around 50 against a huge peak in early 2021 over 1400. The share price pattern could be a head and shoulders top but I don’t think it is; on the contrary my best guess is that Tesla is going to become the biggest company in the world with a multi-trillion dollar market value and that when Coppock does finally turn higher the shares will be a classic buy.

Meanwhile like all shares Tesla is vulnerable to the macro environment and what happens to things like US bond yields, inflation and interest rates.

What is exciting about Tesla is that the company is playing for massive stakes with a serious lead in full self driving capabilities. It may take longer than Elon Musk thinks to get there but if he gets there first how much is that going to be worth. The guy is unbelievably gung-ho, somewhat autistic and a bit crazy but then he is also a bona fide genius so he is entitled to be weird. Personally I think he is amazing. I was looking on Wikipedia and he has 10 children by various mothers and a net worth at that time of $258bn. This guy is beyond larger than life and may end up being regarded as the most extraordinarily innovative businessman of all time.

It has been extraordinarily rewarding to hold Tesla shares in the past when they went off on a bull run. I think it may well be again in the future but if you are a high leverage investor/ gambler like me you need to wait until all the stars are aligned. But this is definitely one to watch like all my benchmark shares.

Coppock is most exciting when it turns higher from a deeply negative position. There is every sign that is where we are heading right now. I have just been looking at the Nasdaq Technology sector index. If the current level for the index is maintained until December the indicator would fall to minus 226, which would be its lowest level since the index was created in January 2006. The buy signal in April 2009, the only previous occasion on which Coppock turned negative, was a massive buying opportunity, one of the greatest of all time.

We need to remember in investment that the past is not a sure guide to the future but it is encouraging, to say the least.

I have just bought my first electric car. I didn’t buy a Tesla although I looked at one. I don’t really drive enough to justify the cost of a Tesla and I find the rather bare interior off-putting, though I might have changed my mind if I had listened to Musk’s AGM talk before buying. Instead I bought a BMW i3, which I think is an amazingly cool car. As it happens BMW has just stopped making them so the one I bought was 2021 with 5,500 miles on the clock and cost almost as much as a new one. My son in law thinks I should have bought something more sensible like a Renault Zoe or a Hyundai Kona Electric but I don’t do sensible, I buy the car I fall in love with which was the BMW. I am picking it up on Saturday so we will see how it goes. I was forced to buy because my trusty old five series BMW has finally given up the ghost.

The only thing that did give me pause was the thought of the fossil fuel car I could have bought for the money I am spending on the i3 but that is always going to be the case for anyone going electric and they are amazing to drive. You can do everything with one pedal because of the braking effect when you take your foot off the accelerator and it is an adventure to have an electric car after so many decades of petrol. Plus we do need to do our bit to save the planet as Musk and my wife and youngest daughter keep telling me.

On 4 August Tesla had their AGM, which gave Musk a chance to talk about what they had achieved, 3,000 cars produced 10 years ago to 3m today and an annualised run rate of 2m cars a year by the end of the year, which roughly equates to four giga factories in California, Texas, Shanghai and Berlin making 500,000 cars each. There are going to be more gigafactories. Demand for Teslas seems to be bottomless. When I spoke to the guy in the Tesla showroom he told me, we don’t sell these cars, we just help people choose which one they want and tell them when they are going to receive it. I even stopped a guy in the street with a brand new Tesla and asked him how long the waiting list was. He said three months and added it’s really worth it.

Is Tesla set for world conquest? I believe so, which means there is no way these shares are going to break down and when that Coppock indicator turns higher they are going to climb, probably a very long way. As Musk said at their agm once they have fully autonomous vehicles (software) the impact on cash flow is going to be dramatic and the more cash this company has the faster it can drive the business forward. It is a phenomenally exciting prospect.

I just found this amazing quote, which I subsequently discovered came from the agm.

Musk also stated Tesla would be building between 10 and 12 Gigafactories to accomplish its goals, with each factory being capable of building between 1.5 and 2 million units annually.

Teslarati, 4 August 2022

This compares with almost 80m cars made around the world in 2021 so we could be looking at Tesla ending up with around 25pc market share of the global car market. How much would that be worth especially given that increasingly the company will be moving to a robo taxi/ subscription model.

On competitive advantage Musk says the hardest thing to replicate will be Tesla’s manufacturing technology.

He also went back to the theme of robots saying that Tesla’s Optimus robot, which it is developing ‘will be more valuable than the car long term and will change the whole concept of an economy’. Currently people think of national output based on figures for gross product per capita but with robots the number of ‘capitas’ will be infinite.

Over the next decade he expects Tesla to have made over 100m cars, he suggested somewhere between 100m and 300m, and launched many new products, ‘some of which people have heard of and some which they haven’t.’

Elon Musk is a great showman but he walks the talk. This guy is amazing and his predictions have to be treated with respect. In answer to a question about what the company would do if he was no longer around he said ‘you mean after I have returned to my home planet’. He is so cool.

In reference to the cybertruck he said it will be ‘a damn fine product’. This is not the funky cyber truck that we are all waiting for but the giant electric-powered semi, which will have a range of 500 miles. Tooling will start at the Texas factory in the next couple of months with production scheduled to begin in the middle of next year.

Talking about autonomous vehicles Musk noted that presently typical car usage is 12 hours a week but with autonomous vehicles and shared usage this could rise to say 50 hours a week. Since the cost of the car would remain the same profit margins should soar. On the basis of projections like this and the impact of the Optimus robot he predicted that Tesla would become the most valuable company in the world which implies a valuation of at least $3bn or triple the present level and maybe much more if the value of other exciting large companies like Apple, Microsoft, Alphabet and Amazon is also rising.

Palo Alto Networks has just reported great results showing strong growth and coming in ahead of expectations. This is a fabulous business and alongside the great results they announced a 3:1 share split. The shares shot higher and look good on the chart but the Coppock indicator is in free fall which makes me nervous of chasing the rally.

If this business is as good as it looks there will be time enough to buy when all the stars are aligned so I am prepared to sit this one out in the short term. It is what happens in bear markets. Even great fundamentals and a promising chart don’t mean that rallies don’t top out and head lower. I prefer to buy against the background of a rising stock market and we don’t have that at the moment.

Strategy

I have just spent an hour and 13 minutes watching Elon Musk speaking to shareholders at the Tesla AGM and it is impossible to do that without feeling pumped. This company is so exciting.

In previous issues I have identified QQQ3, the leveraged ETF which (a) tracks the Nasdaq 100 x 3 and (b) is rebalanced daily so that it outperforms (up and down) even more dramatically than three times the Nasdaq as arguably the world’s most exciting share. Since launch QQQ3 is up 30-fold and at its peak, in November 2021, it was up 90-fold.

Tesla could be another candidate for world’s most exciting share. Since the shares floated in June 2010 the price is up 297 times and has been higher. Like QQQ3 it is obviously not going to go bust and based on Elon Musk’s leadership and vision, prospects look incredibly exciting.

Based on fundamentals Tesla looks a screaming buy. Musk even referred to this by pointing out that many of the negatives that analysts worry about are just bumps in the road and that any panic falls in the price should be treated as buying opportunities.

The only thing holding me back from saying the shares are a buy is the chart and the absence of a Coppock buy signal. We already have a two out of three ain’t bad buy signal with a trend line break and a golden cross on the moving averages.

If you feel like buying a few Tesla shares, I would not dissuade you. Note that the shares will be trading ex a 3 for 1 share split and are poised to open around $300 v a closing price of $891.

On a broader note the thing that is making this stock market potentially so exciting is the combination of exciting individual shares with a falling stock market. There are going to be some fabulous opportunities going forward and you don’t need many to make a fortune.

Further reading

More >
Subscribers Only
Investment Alerts

US Long Bond Yields Test New Peaks

April 19, 2024
Subscribers Only
Investment Alerts

But My Heart Belongs to GoDaddy

April 12, 2024
Subscribers Only
Investment Alerts

Zooming Higher, at Least for the Moment

April 11, 2024
Subscribers Only
Investment Alerts

Let’s Hear it for Spotify

April 9, 2024