Short-Term TSLA Price Movements - 2014

[DaveT]

Alright, here's my explanation for today's monster move.

1. We've got strong historical support (or resistance) at 200.

2. Once we climbed above 200, traders/investors/etc were waiting to see if TSLA would dip back down under 200. We've been on a delicate uptrend since the post Q1 ER drop, but more sideways the past week or two.

3. The patent news gave an opportunity for TSLA to dip under 200 (and even further, ie., maybe to the 200 dma), but the stock held up.

4. Traders/investors/etc realized TSLA wasn't going to go under 200 easily, so buyers/traders/etc started to test the other direction.

5. Some buyer(s) (buying significant volume) got in this morning and that pushed the stock up to 215 as traders/etc reacted and joined in.

6. At 215 or so, the technicals start to look pretty good. There's resistance at around 220 (219.33) that's been tested three times in the past. If TSLA breaks out past 220, then it's free to move higher.

7. Market makers tried to defend the 215-216 level (maybe 1st standard deviation in calls sold) but failed, and that led to TSLA moving even higher.

8. TSLA encountered some resistance at 220, but was able to break through.

9. Thus, we've got today's 224.61 closing (up 18.19).

This is just my reasoning/explanation, as I don't think any of the small/minor news pieces this morning had much stock moving power.

So, how am I seeing the rest of the week? Well, it's a battle between momentum/enthusiasm and the market makers defending certain levels. I'm expecting market makers to defend a 225-230 level (2nd standard deviation move from calls sold last week?). So, if market makers defend it successfully then we'll likely have a minor pullback. But if market makers aren't able to defend successfully, then we might see TSLA break through 230 on it's way higher (next resistance level is 235.73).

I do think there's some short covering happening (ie., see TSLAopt's post). There's also a lot of traders/speculators jumping on board as well.

 

[FluxCap]

Thanks, Dave. I wouldn't underestimate the Model X e-mail to reservation holders (not me yet, but soon) affecting Model X delivery pricing models for some traders.

This is pretty "falcon" cool, if you ask me (I had to!):

 

[Robertj]

Investors business daily. leaderboard. Tesla added

Price $224.61 Price Chg. 18.19 Volume % Chg. 105%

DAILY | WEEKLY
-10-Day Moving Average-50-Day Moving Average-Relative Strength vs. S&P 500Enlarge Chart
UPDATED 05:26 PM ET | Tesla is forming a base with a cup shape. The buy point is not clearly defined yet, but it will be 265.10 unless a handle emerges. Shares surged back above the 50-day moving average Monday after a few weeks of tight trading that gave the base some support. Backstory: Tesla doesn't have many of the traits of winning stocks. Its latest quarter's profit and the forecast for the current quarter are dismal. The up-down volume ratio is weak. Yet, Tesla remains the leader of the auto manufacturer's group and its expected EPS gain of 53% for this year and 166% for 2016 are alluring.

Just as well we are in already

 

[DaveT]

Thanks, Robert. Is TSLA back on the IBD Leaderboard? (I ended my subscription a couple months ago.)

 

[Robertj]

Hi Dave

not on leaderboard as a full buy
recommended buypoint $ 265.10

sometimes they recommend buying the right side of the cup if volume is strong on repeated occasions

I added to my position this morning !

 

[MikeC]

Funny how it's a good deal at 265 but not 225. I know it's TA and all, but that just doesn't make sense to me.

 

[jhm]

Funny how it's a good deal at 265 but not 225. I know it's TA and all, but that just doesn't make sense to me.

I know. I'm always amused by statements of the form: if the price goes to X, then it will go to X+Y. As a statistician in finance, it makes my head spin just trying to think about for what kind of stochastic process might that be true. But, hey, if it works for traders, more power to them.

 

[Jack6591]

I know. I'm always amused by statements of the form: if the price goes to X, then it will go to X+Y. As a statistician in finance, it makes my head spin just trying to think about for what kind of stochastic process might that be true. But, hey, if it works for traders, more power to them.

I have been quick to judge financial analysis, and technical analysis. Consistently believing that the price action of tsla was driven by news event catalysts. The more that I learn, the more I realize, just how little I know.

My intent from the beginning has been to prosper while advocating and advancing the health of the environment. In short, I hope to do well while doing good.

The greatest probability of healing the environment, is the example of prospering while doing the right thing.

 

[sleepyhead]

Funny how it's a good deal at 265 but not 225. I know it's TA and all, but that just doesn't make sense to me.

I use the exact opposite strategy for my trades, than what IBD recommends...

 

[DaveT]

Funny how it's a good deal at 265 but not 225. I know it's TA and all, but that just doesn't make sense to me.

It's a short-term swing trading strategy. The concept is if TSLA breaks through the ATH of 265 with high volume, then the chances are that it is going higher (since it takes a lot to get back up to the ATH and even more momentum/enthusiasm to break through an ATH on high volume). So if it breaks through 265 with high volume, then you buy stock (ie., at 265.5, but volume needs to be high) and then you place a stop limit order a few dollars below 265 in case it's a false breakout and the stock breaks down. As the stock moves higher (ie., 270, 275, etc) then you move up your stop limit.

This breakout strategy supposedly works more often than it fails. And if it fails, the risk is relatively low since you have a stop limit order in place after you've made your purchase.

 

[jhm]

I have been quick to judge financial analysis, and technical analysis. Consistently believing that the price action of tsla was driven by news event catalysts. The more that I learn, the more I realize, just how little I know.

My intent from the beginning has been to prosper while advocating and advancing the health of the environment. In short, I hope to do well while doing good.

The greatest probability of healing the environment, is the example of prospering while doing the right thing.

It's a matter of time scales. Ultimately the more sustainable must win because the alternative is not sustainable. Sadly, that could take a really long time. Best of luck with all your investments.

 

[DaveT]

It's a short-term swing trading strategy. The concept is if TSLA breaks through the ATH of 265 with high volume, then the chances are that it is going higher (since it takes a lot to get back up to the ATH and even more momentum/enthusiasm to break through an ATH on high volume). So if it breaks through 265 with high volume, then you buy stock (ie., at 265.5, but volume needs to be high) and then you place a stop limit order a few dollars below 265 in case it's a false breakout and the stock breaks down. As the stock moves higher (ie., 270, 275, etc) then you move up your stop limit.

This breakout strategy supposedly works more often than it fails. And if it fails, the risk is relatively low since you have a stop limit order in place after you've made your purchase.

Another strategy worth noting is the "pocket pivot":
Pocket Pivots and Buyable Gap-ups Move Beyond Consolidation Breakout When Determining Buy Points: Gil Morales and Chris Kacher Deploy Advanced William O’Neil Style Weaponry

The Detroit autoshow announcement/breakout would be considered a pivot point. Gil Morales sent out a newsletter this morning to his subscribers saying that if Tesla traded at 6m shares or higher today, then it would be a pocket pivot.

 

[AlMc]

I use the exact opposite strategy for my trades, than what IBD recommends...

So buy at 225 and sell at 265!

 

[AlMc]

It's a short-term swing trading strategy. The concept is if TSLA breaks through the ATH of 265 with high volume, then the chances are that it is going higher (since it takes a lot to get back up to the ATH and even more momentum/enthusiasm to break through an ATH on high volume). So if it breaks through 265 with high volume, then you buy stock (ie., at 265.5, but volume needs to be high) and then you place a stop limit order a few dollars below 265 in case it's a false breakout and the stock breaks down. As the stock moves higher (ie., 270, 275, etc) then you move up your stop limit.

This breakout strategy supposedly works more often than it fails. And if it fails, the risk is relatively low since you have a stop limit order in place after you've made your purchase.

DaveT: I know this may not be your strategy and I am a bit slow on the uptake here.....but why not buy at $225 with stop loss of $215 and move it up along with the rise associated with the right side of the 'cup' if IBD analysis says they think 'wait till $265, then buy'?

 

[DaveT]

DaveT: I know this may not be your strategy and I am a bit slow on the uptake here.....but why not buy at $225 with stop loss of $215 and move it up along with the rise associated with the right side of the 'cup' if IBD analysis says they think 'wait till $265, then buy'?

Actually if you believed today's price action was a "pocket pivot", then you would have bought today with a stop loss (and move it up as the stock moves higher like you mention).

However, often when a stock looks like it's retracing toward ATHs, it fails to reach ATHs and breaks down and stays down for a long time. That's what swing traders want to avoid. So, they're looking for relatively high probability trades (ie., not 100% guaranteed, but at least over 60% probability maybe 70-80%). When you have a breakout to ATHs on high volume, that's usually a difficult task unless there's a great deal of momentum/enthusiasm that usually takes it higher on a breakout (sometimes though it's a false breakout, thus nothing is 100% guaranteed). So, swing traders are looking for these kinds of setups. However, this type of breakout to new ATHs after forming a consolidation/base is just one type of trade setup. There are numerous others.

What IBD is saying is that they're not seeing a clear "buy point" until $265. What that means is that they're not convinced that today's move is a breakout (ie., pocket pivot) move and it could be a false breakout, and they'd rather wait until TSLA has proven itself with more momentum/enthusiasm by reaching new ATHs on high volume.

I've been following IBD for about a year on their picks and they're usually hit-or-miss (in my opinion). They did call the high-tight-flag setup last year for TSLA when TSLA broke out over $110. I've got to give credit to them for that. But overall, I'm not impressed by their fundamental analysis, nor am I impressed by their short-term technical analysis. They're more kind of in-between, but leaning toward short-term. Kind of swing-trading. I ended my subscription recently because I wasn't getting much from them. But I understand their approach and most of the trade setups they recommend.

 

[kenliles]

Actually if you believed today's price action was a "pocket pivot", then you would have bought today with a stop loss (and move it up as the stock moves higher like you mention).

However, often when a stock looks like it's retracing toward ATHs, it fails to reach ATHs and breaks down and stays down for a long time. That's what swing traders want to avoid. So, they're looking for relatively high probability trades (ie., not 100% guaranteed, but at least over 60% probability maybe 70-80%). When you have a breakout to ATHs on high volume, that's usually a difficult task unless there's a great deal of momentum/enthusiasm that usually takes it higher on a breakout (sometimes though it's a false breakout, thus nothing is 100% guaranteed). So, swing traders are looking for these kinds of setups. However, this type of breakout to new ATHs after forming a consolidation/base is just one type of trade setup. There are numerous others.

What IBD is saying is that they're not seeing a clear "buy point" until $265. What that means is that they're not convinced that today's move is a breakout (ie., pocket pivot) move and it could be a false breakout, and they'd rather wait until TSLA has proven itself with more momentum/enthusiasm by reaching new ATHs on high volume.

I've been following IBD for about a year on their picks and they're usually hit-or-miss (in my opinion). They did call the high-tight-flag setup last year for TSLA when TSLA broke out over $110. I've got to give credit to them for that. But overall, I'm not impressed by their fundamental analysis, nor am I impressed by their short-term technical analysis. They're more kind of in-between, but leaning toward short-term. Kind of swing-trading. I ended my subscription recently because I wasn't getting much from them. But I understand their approach and most of the trade setups they recommend.

I'm in agreement with that scenario currently. This will help establish support level, but not the initiation to ATH. That will take some additional catalysts coming later in the year. New higher trading range IMO. I'm holding long position of stock/LEAP about 20% above my minimum (40% lower than max); will wait to add. Which straddles the play in case I'm wrong (which I am often!).

 

[dalalsid]

And, right on cue, our old friend Paul Santos is back to doing his thing: desperately trying to talk the stock down. What's incredible is that he's still beating the same dead horse of plateauing demand. Now, that's some serious lack of imagination.

The reason is simple. More BS = More clicks from even more incredulous readers.

 

[The Blue Owl]

The reason is simple. More BS = More clicks from even more incredulous readers.

You're right, I can't resist him. He gets me at "Hello, demand is plateauing" every time.

 

[FluxCap]

Paul Santos doesn't move TSLA, but Adam Jonas does. That's what just happened this morning. Reiterated $320PT and called TSLA the world's most important car company.

 

[Johan]

Thx for the update Flox. Btw love their tone. "Whoa".