This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
Tesla shares were down over 40 percent for the year as recently as April. However after two blistering rallies, with the first one predicated on heightened expectations around the Tesla robotaxi that is slated for an unveil in August, and the second bullish wave unleashed in the aftermath of a better-than-expected Q2 2024 deliveries report, the EV giant's shares have erased all of their steep losses for the year in what is widely being dubbed a short squeeze event. Yet, elevated volumes and re-positioning in the options market suggest that there is a lot more support behind Tesla's ongoing rally than what would ordinarily result from a mere short squeeze event.
Broad-Based Buying And Not Just A Short Squeeze
TSLA remains one of the most shorted names in the hedge fund space and is one of the biggest mutual fund underweights pic.twitter.com/fr3Rxju9Wq
— zerohedge (@zerohedge) June 4, 2024
To be frank, it is quite likely that Tesla's ongoing rally was spurred by a short squeeze, at least initially. After all, the stock was one of the most heavily shorted names in the hedge fund space as recently as June.
$TSLA short sellers hold $5.7B in unrealized losses after last week's rally
Current short position in Tesla's free float is at its highest since 2021, at 3.84% - Ortex Technologies
— Wall St Engine (@wallstengine) July 8, 2024
Moreover, Ortex estimated on Monday that Tesla's current short interest stood at 3.84 percent of its free float, constituting the highest such reading since at least 2021.
Nonetheless, this initial short squeeze-induced buying momentum has now transitioned into an organic rally, courtesy of the broad-based buying in the stock.
Trading in TSLA has jumped to a 1-year high.
Over the last 5 trading days, the total $ amount traded reached $192B, this was last exceeded end of July 2023.
Given robust trading volume at the $250 level over >2 days suggests this was not driven by a mere short squeeze as many… pic.twitter.com/IwvXKVqxuz
— AJ (@alojoh) July 9, 2024
Consider the fact that Tesla shares worth a whopping $192 billion changed hands over the past five trading days. In fact, you would have to go back to the end of July 2023 to find a more potent high-volume spree.
What's more, Tesla's sustained "robust" share volume at around the $250 price for over two trading days negates the impression that the rally is merely a short-lived squeeze.
Finally, this elevated trading activity is now visible in the options space as well where the stock's put support level has climbed to the $240 strike.
Tesla's Reducing Inventory Count
As mentioned earlier, one of the biggest reasons behind Tesla's ongoing bullish momentum is its declining inventory count, which indicates an improving demand environment.
Tesla disclosed on the 02nd of June that it delivered 443,956 units in Q2 2024 against a production level of 410,831 units. Do note that, as per Tesla's IR-compiled consensus estimate, Wall Street analysts expected the EV giant to deliver 437,800 units in Q2.
Accordingly, Tesla’s Days of FG Inventory (also known as the Days of Supply metric) decreased from 28 to 18.80, based on an imputed inventory level of 111,284.067 units and an average daily delivery rate of 5919.413.
Follow Wccftech on Google to get more of our news coverage in your feeds.
