How to trade Tesla's stock

By Philip van Doorn

Also: An expensive stock market, improving home affordability in some areas, and a different way to think about Nvidia's success

Sometimes people who are interested in the stock market need to be reminded that investing and trading aren't the same thing. For example, you might have faith that Elon Musk's long-term vision for Tesla Inc. (TSLA) will bear fruit, that robotaxis will come to the fore and that the company will be able to accelerate its growth by renewing its aging lineup of electric vehicles.

But some people don't want to wait, possibly for years, for an investment to bear fruit. They want quick gains.

Mark Hulbert analyzed price-movement patterns for Tesla's stock over the past three years that might point to a trading strategy.

More coverage of Tesla and EVs:

Tesla's stock is on a huge run. Here's why one bear isn't buying the 'euphoria.'Cathie Wood's ETFs sell Tesla's stock for the first time in nine monthsTesla's stock jumps as deliveries beat expectations by a wide marginFord's EV sales surge, fueled by strength in F-150 Lightning electric trucksRivian's stock rallies after EV deliveries beat by wide margin

Is this expensive stock market close to its peak?

The S&P 500 SPX is weighted by market capitalization, which means its largest three components - Microsoft Corp. (MSFT), Apple Inc. (AAPL) and Nvidia Corp. (NVDA) - together make up 21% of the SPDR S&P 500 ETF Trust SPY.

The S&P 500 has returned 16.9% this year and now trades at a weighted forward price-to-earnings ratio of 21.4, based on consensus earnings-per-share estimates among analysts polled by FactSet. A year earlier, the index's forward P/E ratio was 19.4, and the 10-year average has been 18.1.

For market timers, the question is: Are we close to a top for U.S. stocks, before a correction (typically considered to be a decline of at least 10%) or a bear market (a drop of 20%)?

Michale Brush broke down market-top triggers and warnings and offered advice on what investors should do now.

Stock-market warnings and related coverage:

'Any technology stock with an AI story is rising too far and too fast,' this veteran trader warnsStocks are headed for a 'summer squall,' Citi warnsStocks could struggle to surpass Wall Street's high bar for second-quarter earnings, Goldman saysWall Street's most bearish strategist is leaving JPMorgan. Here's a look at his market calls.

Yes, homes have become more affordable in a few areas

Aarthi Swaminathan shared some interesting data - an analysis of 589 U.S. counties by Attom Data Solutions showed that nearly all had become less affordable for home buyers during the second quarter. Here are seven counties that stood out as exceptions and actually became more affordable; the list might surprise you.

More housing coverage:

Is it possible to get a 5% mortgage rate? Yes, but here's the catch.A surge of new apartments is hitting the market. Renters in these cities stand to benefit the most.

Are you making this mistake with your retirement account?

Beth Pinsker writes the Fix My Portfolio column. This week she explained how most people earnings $100,000 or more per year are making a particular mistake with their retirement savings.

Bitcoin's volatility and risk

During the first half of 2024, bitcoin (BTCUSD) rose 44% to $60,329. The virtual currency had fallen to $55,789 as of late Friday morning. Frances Yue explained events correlated with the decline, and in her Distributed Ledger newsletter outlined four things cryptocurrency investors should be watching through the end of 2024.

The Moneyist helps with some good news

Quentin Fottrell - The Moneyist - often helps readers navigate bitter financial conflicts. But this week he helped a reader figure out what to do with $600,000 in inherited cash.

More typical quandaries for the Moneyist:

'I'm appalled': My grandfather co-signed his grandson's student loan. After my grandfather died, my cousin skipped town. Will the estate have to pay the debt?'He thinks I'm too materialistic': My husband and I are in our 40s. He takes zero interest in our finances. He doesn't even know the name of our mortgage company. What can I do?

Bonds have become more popular with individual investors - here's an easier way to buy them

It is easy to buy shares of a bond fund, but they have management fees and fluctuating share prices. An investor might want to buy individual bonds and hold them until maturity, to keep all the interest income and stop worrying about market-price fluctuations. But many bonds are issued in denominations too high for some investors to afford.

Gordon Gottsegen explained what some brokerage firms have been doing to make it much easier for investors to buy bonds.

More from Gordon Gottsegen:

Retail investors are turning to bonds like never before and brokerages want in'We don't want customers to blow up their accounts' - Why brokerages are pushing investor education

Another bond investing angle: A Trump victory could fuel more inflation. What investors can do now to protect themselves.

A different way to think about an Nvidia stock bubble

Shares of Nvidia have returned 156% this year, following a 239% return during 2023. The company has continued its streak of showing large sequential and year-over-year increases in quarterly sales and earnings this year, as it continues to dominate the market for graphics processing units (GPU) being installed by data centers to support their corporate clients' efforts to develop products and services that make use of generative artificial intelligence.

But it is fair to ask if investors are looking at a bubble for Nvidia's stock. Historical comparisons have been made to the dot-com bubble in the stock market that burst between 2000 and 2002. But this week, Therese Poletti looked much further back - to compare Nvidia's astonishing success to the early days of radio.

Read: Why this fund manager trimmed his Nvidia position - and has a warning about AI

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-Philip van Doorn

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07-06-24 0508ET

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