Tesla short sellers suffered losses in the billions of dollars following the stock's winning streak.
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Tesla Inc. (TSLA) has been on a tear recently, to the detriment of short sellers. As of June 14, 2023, Tesla’s Aroon Indicator signaled a bullish trajectory, leading many to predict that the electric vehicle giant’s stock price is likely to continue its upward trend. If the projections hold, Tesla short sellers, who have bet against the company's stock, stand to lose billions.
The Aroon Indicator Gives a Bullish Signal
Named after the Sanskrit word for 'dawn's early light,' the Aroon Indicator, developed by Tushar Chande in 1995, is used by traders to predict if a particular security is trending, and how strong that trend is. The bullish signal from the Aroon Indicator for Tesla indicates the likelihood of the stock's upward move.
On June 14, 2023, the Tickeron's A.I.dvisor detected that Tesla's AroonUp (green line) was above 70, and the AroonDown (red line) was below 30. This specific pattern often signifies a bullish setup, suggesting that traders might want to consider buying the stock or purchasing call options.
In past instances where the Aroon Indicator showed a similar pattern for Tesla, the stock generally moved higher in the following days. According to the A.I.dvisor, the stock moved upwards in 268 out of 295 similar occurrences, giving the bullish signal an impressive success rate of 90%.
The Implications for Short Sellers
This anticipated upward trajectory is not good news for Tesla's short sellers. Short selling is an investment strategy where investors borrow shares of a stock to sell them with the hope of buying them back at a lower price later. If Tesla's stock price continues to rise, these short sellers could stand to lose significant amounts of money.
In recent years, Tesla's stock has been a popular target for short sellers, who have questioned the company's high valuation compared to traditional automakers, as well as potential profitability and production issues. But as Tesla continues to defy these skeptics with its stock price performance, these short sellers find themselves in an increasingly precarious position.
The latest bullish signal from the Aroon Indicator adds to a series of positive developments for Tesla, as the company continues to surge ahead in the electric vehicle market. This reinforces the idea that betting against innovative companies such as Tesla can be a high-risk proposition.
However, short sellers have been known to weather through turbulent times, and they might hold their positions with the hope that the tide will eventually turn in their favor. Yet, given the strong indicators for Tesla's stock price rise, they might find themselves under more pressure than ever to reevaluate their positions. As the electric vehicle market continues to expand, Tesla's short sellers could potentially find themselves in a deepening hole, if the stock's winning streak continues.
TSLA in +9.30% Uptrend, rising for three consecutive days on September 05, 2024
Moving higher for three straight days is viewed as a bullish sign. Keep an eye on this stock for future growth. Considering data from situations where TSLA advanced for three days, in of 354 cases, the price rose further within the following month. The odds of a continued upward trend are .
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