How to Play 'Trump Stocks'
Here's my take on Trump Media and Technology Group, Tesla and Bitcoin.
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Trump. Harris. The market just wanted a winner.
I barely finished dinner before many on social media and betting markets declared Trump the heavy favorite to win.
And they were right, as we found out this early morning.
But even before the election was called, the same sentiment played out in the price of Bitcoin, which touched $75,000, a new all-time high, around 10 p.m. ET. The cryptocurrency was hit with some immediate profit-taking, but that wasn’t a surprise after a big run as the early results hit the tape. By this morning, BTC was around $74,000.
Trump Media and Technology Group DJT will remain a volatility trader’s dream stock for the next week. I classify this one as fun to trade, but the fundamentals don’t track the valuation. A rally on a Trump win paired with strong overall GOP results bode well for the stock now, but fundamentals will win out in the long run.
So be cautious if you were chasing DJT into a big move that's higher. If this stock gets into the $50 or higher range, it will be hard to resist buying puts or put spreads set to expire in a few months. The stock already has a huge short interest of around 17.5% and has spiked into the $70s in the spring, so I am hesitant to short the stock outright but don’t mistake a political victory as sudden justification for a $10 billion or $15 billion valuation on a company on pace for a couple million in revenue and tens of millions in losses every quarter. In premarket trading, the stock is now around $44.57.
The Trump sentiment carried over into Tesla TSLA last night as well. Based on late-night prices, Elon Musk’s backing of Trump rewarded him, well, Tesla, with a $50 billion bump in valuation. A close over $270 puts Tesla into a breakout mode. While I can’t argue that fundamentals support an $850 billion or higher valuation, Tesla is approaching $100 billion in sales with income over $10 billion. Furthermore, as part of the "Magnificent 7" tech stars, this is one I would consider a long-side trade rather than looking at a put buy. The first target on a breakout is $300, an obvious round number, but I would place $320 as my ultimate upside.
And in case you forgot, we’ll hear from the Fed soon.
Strap in. These next few days are going to be entertaining.
