Is this tesla stock forming a top right now should elon be worried because you know what happens after tops right: the downfall, the crash potential crash, of course, but that’s. What we’re going to talk about in this video and i’m fine talking about tesla all the time, because there are a lot of lessons that we could learn from this one stock and how people react to it. Now i personally don’t care, if it crashes or not. Apart from the fact that you know, i really want elon to win in whatever he’s doing, but in terms of my own portfolio, i don’t care because we’ve been taking profits and managing risk this whole time. So, even if tesla did collapse, it’d be all right and as always, if you want to learn more about how we manage tesla and how we just you know, run our strategy in general same strategy. I myself and a bunch of our fallible members use then definitely check out this free training. You can see there’s an example of tesla right here, but there’s a link to that training in this video and down below in the description and comments, definitely take it. It’S free, you got nothing to lose and everything to gain so there’s been a lot of bearish theses. Lately, theses, as in the plural of thesis, as opposed to thesis, i mean there’s, always a lot of tesla bears, but i feel, like the bear cases just grow as the stock grows.

You think it’d be the opposite. If tesla is going up – oh okay, maybe the bears were wrong, but no, they just dig in and get stronger, so let’s talk about why most of the bear cases don’t matter, first, one being the biggest one that i always hear. Is valuation i’ve been hearing that from some popular youtubers as well and they’re talking about valuation in terms of the p e ratio, which is the price to earnings ratio? And if you try to use the p e ratio in the most basic way, then you could say that hey a higher p e ratio means this stock is more expensive, because the price you’re paying per earnings is very high, so you’re paying many dollars for each One dollar of earnings, so that’s the theory, but of course, in practice, p e ratios don’t actually work like that. For example, tech companies are usually gon na have way. Super high p e ratios, and my argument is that valuations and p e ratios don’t really matter in the first place and the reason i believe that is because valuations are purely subjective. Who cares if a stock is at a 300 p e ratio versus a 400 p e ratio what’s the real difference there? How is that? Even properly fitting into your model, because at the end of the day, valuations are just based off the people who are investing in the stock more than anything it’s supply and demand.

Why were they able to sell pet rocks in the 80s or was it the 70s? I don’t know because people place value on this thing and that guy got super rich who was selling? Did those rocks actually have more value than the rocks you could find everywhere? I guess they did, because people paid money for them right. There was demand and that’s what pushed the price up. If you want another example of stupid valuations that is very relevant to this example. You can look at this. You guys remember this piece of art, at least they called it art. It was a banana taped to a ball and it’s sold three consecutive times, first for 120, 000 and then finally, for a hundred and fifty thousand dollars – and you know, those numbers for a banana taped to a wall are extremely offensive to me as a person of Indian descent, he paid how much for this banana, what we’re cheap as it is, but a hundred and fifty thousand dollars for a piece of duct tape and a banana really indian or not it should offend all of us. But what’s interesting is that the market is basically just like this banana. Oh and of course, the best part about this banana story is the other artists that walked in and ripped the banana off the wall and ate it and the act of eating the artful banana was the actual art itself and everyone was shocked and stunned.

But according to the new york times, the stunt did not actually destroy the artwork or whatever monetary value it might have had. At the moment. The three buyers who collectively spent about ‘0 thousand dollars on the tape fruit, had bought the concept of the piece which comes with a certificate of authenticity from the artist saying yes, that’s, my banana that i put on that wall along with installation instructions. In case, you got confused about how to tape a banana to a wall so it’s up to the owners to secure their own materials from hardware and grocery stores and to replace the banana if they wish, whenever it rots so after the second banana artist consumed the First, banana the gallery just taped another one to the wall. No problem incredible: do you get it now? Do you understand the concept of art and value you get what i’m saying right, it’s just a huge conspiracy. This whole value idea that people just latch onto for no reason other than the fact that someone else told them that something has value. But what is value you guys get it you get it. So this banana on a wall as a concept sold for a hundred and fifty thousand dollars now we’re, not experts in art, but i think that’s in the higher valuations given to a ripe banana. But the reason it received this high valuation is because there’s a low supply of concept banana art, yet tons of demand.

For you know this unique piece of art, low supply, high demand, high price, which brings us back to why valuations don’t, actually matter, they’re more of a consequence of the real driver which is supply and demand and that’s the driver. We need to focus on. So if you look at this chart right here of the price to sales of the entire s, p 500 it’s at a record high, meaning huge valuation and the reason that all these stocks are at record valuations is because of this same banana concept. There’S, a lot of money out there that needs to be invested and the supply of stocks actually keeps falling, and i know we’re talking about the full market here, but this supplies the tesla too, like if you look at the gross issuance of shares, so new shares Coming onto the market that has been dropping for years, meaning there’s less supply of shares for people to buy, and you already know where the demand comes from right demand comes from when you pump the economy full of money. So everything that printer powell is doing you know all the fiscal response to the ccpv is putting tons and tons of money. And then, where is this money gon na go it’s all demand that has to chase that supply of fewer and fewer shares? So what’s going to happen, small supply high demand, the price of those things are going to shoot up, and this is why market valuations are such a useless variable.

Engaging the sustainability of a market trend, at least over the intermediate term. Valuations can always go much higher or lower than you think, because multiples actually have nothing to do with the durability of the cycle. Just like our banana, it has everything to do with your basic supply and demand. So it goes back to that old, saying the market could stay irrational far longer than you could stay solvent. So in the case of tesla, why even look at valuations valuations aren’t going to stop this thing from going up, so you can’t, look at the p e ratio or the peg ratio or any of those ratios and say hey. You know what this is not a good idea, because that’s really not as relevant here now. Of course it depends on your strategy. If you’re sticking to a strategy where you’re saying you’re only buying value stocks, all right, then fine, stick to that. You wouldn’t be anywhere near tesla and i’m, saying valuations, don’t matter right, but over the long term, maybe they do, but in a certain particular way. So if you’re, a value, investor, buffett style and you look for a stock that is undervalued, what’s, the real goal there by saying it’s undervalued. What you’re saying is that you think you can buy this stock and that eventually, the stock market will value it at a higher price. But what does the stock market need to value at a higher price? It needs more people piling into that stock right you’re, not just going to get value for value sake, dividends aside, you still need other people to recognize that value too, and then what happens for the price to actually move supply and demand once again, so in that Sense, what are you using value for you’re, just using it as a signal to tell you that hey? This is a potential area where other people might start buying you’re just trying to play the player, but, as i said that you’re probably thinking well isn’t that the same case with tesla because it’s overvalued, so you think people are going to sell, no, not necessarily that’s.

Why, when it comes to value – and we use value sometimes too in our research? Actually, we use it a lot depending on the strategy, but anyway, the way we use it is like. Yes, that is a signal. Okay, this stock might be undervalued, undervalued, but we’re not going to get into it until we see price move in the right direction, because price moving in the right direction is a signal that other people are actually getting in. They see the value too and really what’s happening is that there is demand coming into the stock, which is crazy to think about right because most value people they swear off any type of price action. But really, why would you want to sit in a stock, that’s, undervalued supposedly for years and years, it’s just dead money? You want to get into that thing when it’s going from undervalued to overvalued. So, at the end of the day, the price should still be your guide because that’s the real signal of the supply and demand valuations, you know they’re going to be all over the place and that’s just fine. If you understand what value really is still based off humans and supply and demand, you could even argue that if you think something is undervalued because the price is too low. Well, maybe it actually isn’t valuable at all, because no one else is investing in it. Even if the assets are this much and the stock price is only this much and you do all your calculations, who cares no one’s buying it it’s dead money.

So you just got to remember that it’s really more of a signal than anything now. Another reason that you look at valuations and even more than that just fundamentals, is to give you conviction in a stock to hold it over the long term. So this is what bullish people do in tesla 2 and they say i’m never going to sell, because i’ve done my analysis on this, and i think this is the stock and the company of the future. If you haven’t done all your research, then you’re never going to have conviction to do that, and in my book, with my personality and my strategy, i think that’s way too risky that’s. Why, in this strategy that i talk about in this training, we are not using fundamentals because we’re not going to hold something as it corrects 50 as it crashes, which is the same thing. I said in the beginning of this video right. I don’t care. If tesla crashes, because we’ll get out and we’ve already taken a lot of profits on the way up, not saying that strategy of fundamentals for conviction, doesn’t work, because it does it’s just not something that i’m comfortable with doing i’m more about price and supply and demand Over everything else, so i’ll just fiat money anyway. Now, in our strategy that i keep talking about, we are currently long, tesla and we’ve been long for a long time, because we play these bigger trends and we want to hold on as long as possible until the trend bends.

You know that’s when we get out, so we haven’t had any signals to get out just yet you can see the tesla is still number one on our tsi scanner list, and what this tsi tells us is how strong is the momentum in these stocks and tesla Is number one in the entire nasdaq and you can see we get a whole ranking here and again we talk about the tsi more in this training. But the point here is with tesla being number one there’s, not much of a reason to exit here, so we’re gon na continue to hold so that’s how we’re playing it. But you know everyone plays it a different way and we could also look at this. On more of a short term time frame, so if you see this candle right here that happened on the 13th, it was a pretty bearish candle. So you can see the tesla opened that day around 1660 when as high as almost 1800, but then closed lower down by 1500. So what is that telling us like what’s the psychology behind that move because candles and shapes they don’t matter unless they’re actually telling us what’s going on in the psychology of these investors? So the way i would read that is, that hey a bunch of people started buying so much in fact that this thing gapped up at the open and then it shot up higher people buying buying buying. But it hit a point where all of a sudden, a ton of sellers came in so much so that it brought it down below where it opened and it closed lower.

So when you see a candle like that, what it’s telling you is that there’s a lot of people trying to sell and they already did and going forward this area – might be an area of resistance where more people will likely sell. But it gives you a hint to the psychology that maybe hey the steam in this move has run its course a little bit, and now, as you can see, you know we had a little bit more of a down move after that a few days after then. We got a real, strong up move, but look where it stopped right in that area again same with the price action, these two days so again, it’s giving you more evidence that this might be a little resistance right here that the stock price is going to have To fight with that’s, when you could draw your line right there and again, it’s just a line it doesn’t have to be perfect. I purposely make them extra thick because that’s, how i like it, but also so that i’m not like hyper focused like oh. It has two cents over this line. It must be a breakout, nah that’s stupid, so that looks like a resistance area, but another thing i see is that hey, there have been higher lows each of these days, meaning there’s buyers putting higher and higher bottoms on each day, so there’s some strength coming in. So i could make another shape, pretty pretty shapes.

You know i could make it look like this, and now it looks like a little compression doesn’t. It looks like a little compression triangle and whenever price compresses like this well, then a breakout is gon na happen. Will it happen to the upside or the downside, that’s what you want to look for some people like to get in before the breakout happens me personally when i was doing breakout trading, i would wait for it to happen, because i would want to see the signal And then put my money in because you don’t actually know which way it’s going to break so, as you can tell, i am recording this video super early it’s wednesday middle of the day. By the time this video actually comes out – and you guys are watching it will probably be saturday, meaning there’s – going to be two and a half more days of action. So will a breakout happen during that time? I don’t know. Will this cute little pattern? I draw just be broken by something else happening, maybe either way. This could be good, though, because you could kind of see how you think about it in real time and then see what happens, and then you could go down in the comments and call me an idiot if i’m wrong, that’s always fun. If i had to make a bet on this, what we just look at right here, i would say tesla’s gon na break higher, i believe in tesla, but more than that, i believe in all the money that’s floating around people still want to invest in tesla.

Is the most popular we will see what happens but again i don’t actually make plays off of this because it’s too short term for me and my strategy, the one we go over in here, it’s more long term still has fantastic returns, we’re up over like 42 Right now and that’s really the benefit from being able to catch long term trends and sitting and waiting in that trend, jesse livermore style. But we talk more all about that in this training.