TSLA mooned today because short selling was BANNED

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by Dc1993x

Here are the facts:

  • After the financial crisis, the SEC created rules to help protect long-term investors
  • This was done to maintain investor confidence & to prevent large intra-day crashes

Don’t believe me? See for yourself:

I know you aren’t going to read that, so let me summarize:

  • If a security drops more than 10% in a day, a short sale circuit breaker is triggered
  • The breaker lasts 2 days (current day through end of “next-day” trading session)
  • The rule gives priority to long sellers and imposes an uptick rule on additional short sales
  • An uptick rule means that to sell short, your “ask” must be at least 1 tick higher than the current “national best bid”

Here’s a quote directly from the SEC document:

“We believe it is appropriate at this time to adopt a short sale-related circuit breaker because, when triggered, it will prevent short selling, including potentially manipulative or abusive short selling, from driving down further the price of a security that has already experienced a significant intraday price decline, and will facilitate the ability of long sellers to sell first upon such a decline.”

Why is this important?

  • Because price can’t be driven down further for at least 2 days
  • This usually leads to a rebound / reversal rally

Let’s take a look at what happened to Tesla

  • Tesla triggered the circuit breaker at 11:39 on Friday

Proof: www.nasdaqtrader.com/dynamic/symdir/shorthalts/shorthalts20200504.txt


What was the price at 11:38?

  • Approximately 700


Now let’s take a look at what happened the rest of the day:

  • Notice how it struggled to stay below that amount
  • For put holders, always look to exit within the next 10-20 minutes after this triggers
    • This will likely be your “max profit”


Now what happened today?

  • Tesla mooned to 769… 10% gain
  • Without any downward pressure, the rebound easily gained momentum and continued throughout the day

Before you criticize me.. I’m fully aware that there are other rules / regulations that also play a role.. I just wanted to point out one of the reasons why Tesla mooned today..

If you want to beat the exchange, you need to understand every rule… inside and out


Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.


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