The pullback in Tesla made no sense.
In fact, we said that after the EV stock fell 11%, or $105 a share on fear that Elon Musk’s Twitter purchase would take time away from Tesla. But here’s the thing. Elon Musk has a history of juggling multiple, big projects. It’s why he’s a multi-billionaire.
With that, we also noted, “Tesla is a screaming buy on weakness.”
At the time, TSLA traded around $886. Today, the stock is up to $901 – a $15 gain in hours just by trading something that should have never happened. From a current price of $901, we’d like to see Tesla initially refill its bearish gap around $1,000. From there, perhaps $1,150.
It’s another reason why traders need to remove emotion from their trading.
Oftentimes bringing emotion into trade is a bad idea.
Instead, do your best to remove all emotion from your trading. That doesn’t mean you have to have ice flowing through your veins. It simply means you need to re-think your strategy. No matter what your emotion says, never allow emotion to dictate your trading action.
Especially panic. When we panic, most of us get irrational. We sell everything, and forget markets are resilient even in times of absolute chaos. If you panic, you sell. And if you sell, you miss the potential for the recovery rally.
It’s also why you should never follow the herd.
One sheep jumped off a cliff. Another followed. All of a sudden, hundreds of sheep began jumping off a cliff because everyone else was doing it.
Jaws on the floor, shocked shepherds would watch 1,500 sheep jump off the cliff.
That’s a true story, by the way.
Hundreds of sheep perished. Each followed and jumped simply because every other sheep was doing it. And as uncommon as this may sound, it’s not. In fact, this very same thing happens each and every day among traders and investors.
We buy because everyone else does. We sell because everyone else does.
But we never question what we’re really buying or selling, which can be quite costly. Instead, we take the leap simply because everyone else is doing it.
And if everyone else is doing it, it must be right. Unfortunately, no.