Tesla typically experiences sharp declines following earnings, even after positive surprises. The stock tends to move 10% on earnings day and up to 16% in the following week. The short position is at a historic low of 2.8%, which has previously coincided with negative stock returns.

TSLA is very volatile around earnings, usually moving by 10% over the past two years. Including the week after the move, the change can be around 16%.

The change in the short position the week before is not predictive of the stock's return.

While the stock return is predictive, the sensitivity and correlation are low.

TSLA almost always moves down after earnings, even when the surprise is positive.

Under normal circumstances, the most it could predict is a 3% move up or down, but the standard deviation is 16%.

Therefore, in TSLA, using standard approaches, the noise or risk is substantial compared to the expected move.

For example, positive returns occur 25% of the time, but if they do not happen, the negative returns are 10%.

The current short position in TSLA is at a low of 2.8%. It was much higher during the last two earnings reports, when the stock was up 12% once and down 12% the day after earnings.

Before that, the short position was lower, corresponding with a -10% move, and prior to that, it was higher while the stock was down 10% three times in a row.

Thus, whether the short position is low or high, the stock has been down 10%.

The graph illustrates this pattern: with a low short position, the stock usually declines, while with a higher short position, the stock can move either up or down. This data point, by itself, is bearish.

In the earlier days, TSLA had short squeeze alerts when the stock rallied, and the short position was larger. It is possible that the short position actually decreased, indicating a potential squeeze. Now, with a smaller short position and a lower stock price, that is no longer an issue.

Tesla’s low short position suggests a bearish outlook. Historically, the stock has moved down 10% post-earnings, even when positive surprises occur.

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