{"id":36305,"date":"2016-09-17T16:40:06","date_gmt":"2016-09-17T23:40:06","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=36305"},"modified":"2016-09-17T16:42:46","modified_gmt":"2016-09-17T23:42:46","slug":"setting-up-next-pairs-trade-tesla-motors-solar-city","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2016\/09\/17\/setting-up-next-pairs-trade-tesla-motors-solar-city\/","title":{"rendered":"Setting Up the Next Pairs for Tesla Motors Versus Solar City"},"content":{"rendered":"<p>A little over two weeks ago <a href=\"http:\/\/drduru.com\/onetwentytwo\/2016\/09\/03\/pairs-trade-tesla-solar-city-tinderbox\/\" target=\"_blank\">I made the case for implementing a pairs trade<\/a> on Tesla Motors (TSLA) long versus Solar City (SCTY) short. What unfolded from there rolled out according to my first scenario: SCTY continuing to sell-off and TSLA outperforming. Indeed, TSLA&#8217;s outperformance has returned to the all-time high level set earlier this year. <\/p>\n<p><center><br \/>\n<figure id=\"attachment_36306\" aria-describedby=\"caption-attachment-36306\" style=\"width: 510px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/09\/160916_TSLAvsSCTY.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/09\/160916_TSLAvsSCTY.png\" alt=\"TSLA&#039;s outperformance over SCTY is streaking straight up again.\" width=\"520\" height=\"318\" class=\"size-full wp-image-36306\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/09\/160916_TSLAvsSCTY.png 520w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/09\/160916_TSLAvsSCTY-300x183.png 300w\" sizes=\"auto, (max-width: 520px) 100vw, 520px\" \/><\/a><figcaption id=\"caption-attachment-36306\" class=\"wp-caption-text\">TSLA&#8217;s outperformance over SCTY is streaking straight up again.<\/figcaption><\/figure><br \/>\n<strong>Source: <a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=TSLA%3ASCTY&#038;p=D&#038;yr=4&#038;mn=0&#038;dy=0&#038;id=p44764633385\" target=\"_blank\">Stockcharts.com<\/a><\/strong><br \/>\n<\/center> <\/p>\n<p>As a result of SCTY&#8217;s continued sell-off, I was able to log a profit on the pairs trade which expired on Friday, September 16. I will relaunch the pairs trade hopefully in the coming week, but I am going to pick my spot carefully.<\/p>\n<p>SCTY is making a bid for a triple bottom. Friday in particular featured a break below the two previous lows of 2016 followed quickly by buyers who managed to close out SCTY with a gain. The resulting pattern is called a hammer. It describes a set-up where sellers finally exhaust themselves and buyers rush into the vacuum. All SCTY needs is follow-through; confirmation of a (short-term?) bottom could come with a close above the recent consolidation range (around $18.25 or so).<\/p>\n<p><center><br \/>\n<figure id=\"attachment_36307\" aria-describedby=\"caption-attachment-36307\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/09\/160916_SCTY.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/09\/160916_SCTY.png\" alt=\"Solar City (SCTY) is making a bid to hold a triple bottom after over two weeks of accelerated selling\" width=\"550\" height=\"375\" class=\"size-full wp-image-36307\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/09\/160916_SCTY.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/09\/160916_SCTY-300x205.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-36307\" class=\"wp-caption-text\">Solar City (SCTY) is making a bid to hold a triple bottom after over two weeks of accelerated selling<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>TSLA also looks like it is carving out a bottom after a near test of the June lows. The move is not quite as dramatic as SCTY, but TSLA did start the month with intense selling. TSLA&#8217;s bottoming is less seller&#8217;s exhaustion and more buyer&#8217;s resolve. <\/p>\n<p><center><br \/>\n<figure id=\"attachment_36308\" aria-describedby=\"caption-attachment-36308\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/09\/160916_TSLA.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/09\/160916_TSLA.png\" alt=\"TSLA is making a bid to hold a trading range that has been in place for over 4 months.\" width=\"550\" height=\"375\" class=\"size-full wp-image-36308\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/09\/160916_TSLA.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/09\/160916_TSLA-300x205.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-36308\" class=\"wp-caption-text\">TSLA is making a bid to hold a trading range that has been in place for over 4 months.<\/figcaption><\/figure><br \/>\n<strong>Source for charts: <a href=\"http:\/\/www.freestockcharts.com\/platform\/v1\" target=\"_blank\">FreeStockCharts.com<\/a><\/strong><br \/>\n<\/center><\/p>\n<p>For the pairs trade, I am not interested in playing a potential bottom. Instead, I am sticking with the primary scenario: TSLA drops its bid for SCTY whether for regulatory reasons or shareholder disapproval. Under this scenario, TSLA should rally and SCTY should sell-off. I see the current bid as an attempt to save SCTY from bankruptcy, so the trade with the greater potential is a bet against the acquisition. There is likely no upside in betting on a successful acquisition. I also see a TSLA sell-off and a SCTY rally as the least likely scenario. Thus, my pairs trade is long TSLA and short SCTY. If I can fade a rally on SCTY, I will get the best price on this pairs trade. The chart of the TSLA\/SCTY ratio also suggests that SCTY is overdue to outperform TSLA.<\/p>\n<p>My first pairs trade was a test. The next pairs trade will be more substantial and targeted for a longer timeframe, perhaps somewhere between January and March.<\/p>\n<p>Be careful out there!<\/p>\n<p>Full disclosure: no positions<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A little over two weeks ago I made the case for implementing a pairs trade on Tesla Motors (TSLA) long versus Solar City (SCTY) short. What unfolded from there rolled out according to my first scenario: SCTY continuing to sell-off and TSLA outperforming. Indeed, TSLA&#8217;s outperformance has returned to the all-time high level set earlier &#8230; <a title=\"Setting Up the Next Pairs for Tesla Motors Versus Solar City\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2016\/09\/17\/setting-up-next-pairs-trade-tesla-motors-solar-city\/\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1303,32,3,511,62,518],"tags":[418,1170,16,887],"class_list":["post-36305","post","type-post","status-publish","format-standard","hentry","category-bottom","category-options","category-solar-energy","category-support","category-technical-analysis","category-transportation","tag-pairs-trade","tag-scty","tag-solar-stocks","tag-tsla"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Setting Up the Next Pairs for Tesla Motors Versus Solar City - ONE-TWENTY TWO: Trading Financial Markets<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/drduru.com\/onetwentytwo\/2016\/09\/17\/setting-up-next-pairs-trade-tesla-motors-solar-city\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Setting Up the Next Pairs for Tesla Motors Versus Solar City - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"A little over two weeks ago I made the case for implementing a pairs trade on Tesla Motors (TSLA) long versus Solar City (SCTY) short. 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What unfolded from there rolled out according to my first scenario: SCTY continuing to sell-off and TSLA outperforming. Indeed, TSLA&#8217;s outperformance has returned to the all-time high level set earlier ... 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