Bitcoin jumped more than 20% on Monday after Tesla & # 39; s most recent SEC filings revealed that the electric car maker had bought $ 1.5 billion worth of cryptocurrency. The Palo Alto-based EV manufacturer said it acquired the digital currency for "greater flexibility to further diversify and maximize returns on our cash."
What that vague, fraught language could actually mean is that Tesla purchased (NASDAQ 🙂 as both an investment and for additional liquidity, as the company said it would accept the alt currency as a form of payment for its products.
It should of course be no coincidence that Elon Musk has recently been promoting cryptocurrencies, including Bitcoin and. Now some are warning that the SEC will investigate Musk's tweets to his 46 million followers on Twitter, in support of the digital currency. Tesla CEO urged his followers in & # 39; Reddit Rebellion-esque & # 39; fashion, with relevant memes and by making seemingly pseudo-promotional statements in interviews, such as:
"I think Bitcoin is on the verge of widespread adoption by conventional finance folks."
It's almost as if Musk is flipping the bird to the financial institution, not only defying the long-held belief that Bitcoin is not a viable investment platform, but that it is certainly not a store of value and cannot be used as money. Is Musk just a corporate badboy who takes pleasure in ripping off the SEC chain (as he has in the past)? Or does he have a separate agenda?
Legendary investor Michael Burry, who shorted the US housing market before the 2008 crash, thinks so. He believes Musk's crypto chatter is nothing more than deception. According to Burry, the Tesla CEO is simply diverting market attention from the fact that Chinese regulators are investigating Tesla for customer complaints about quality issues.
Today, Tesla & # 39; s Shanghai plant is the only 100% US manufacturing facility in China, a feat accomplished during the US-China trade war. Sales in the Asian nation have doubled in the past year, with Sino-based purchases now about a fifth of Tesla sales.
While all of this unfolds, stock investors are on hold, awaiting additional developments to indicate where the stocks may go. This indecisiveness is visible on the map.
The stock was trading within a falling flag, bullish after the previous 44% rise. The price is currently struggling to stay above the uptrend since the November low.
The downward slope was presumably caused by profit-taking, although the price remains within range due to new buyers. A breakout up would complete the pattern, with the $ 270 implied from the point of breakout repeating the near straight line before investors took out in mid-January. That happened after Chinese internet giant Baidu (NASDAQ 🙂 announced it was planning to develop an EV with local car maker Geely Automobile Holdings (HK :).
However, the month-old flag ages and can lose its strength as disgusting bulls unwind. Still, the price has developed a pennant since Feb. 2, bullish after the preceding move of nearly 13% whose upward break would target the same sequel, while serving as a catalyst to eventually complete the even bigger flag.
Trading Strategies – Long Position Setup
Conservative traders would have to wait for the completion of the pattern whose upward breach would spill above the January 25th high, followed through a return-move showcasing support.
Moderate traders could go long after penetration above $ 890, with a filter of at least two days keeping price above the flag.
Aggressive traders would get ahead of the crowd by trading the bottom of the pennant, provided they understand and accept the risk of jumping a gun and have a trading plan that reflects that.
Here's an example:
Trade Example – Aggressive Lung Position
Entry: $ 845
Stop Loss: $ 830
Risk: $ 15
Goal: $ 1,000
Reward: $ 155
Risk: Reward Ratio: 1:10
