TSLA Technical Analysis

[Stars aligned]

Lower lows and lower highs is just a TA manner of pointing out a bear market of the issue in concern. Bull markets will have higher highs and higher lows. Often there can be periods where not much happens bull or bear wise.

When to be bullish? Big picture can be as simple as 1) when the market is moving up and 2) when shorter term averages are above longer term averages and they are all moving UP. Right now all short term averages are going down, and long term averages are starting to level out or even move down.

Obviously yes

 

[OrthoSurg]

we will have an answer this week to see if it was a dead cat bounce or reversal

 

[bxr140]

This being the technical thread, there's a pretty good technical setup forming here. Good ascending triangle consolidating over the past few days that's fixin' to layer on top of 20MA. Ideal entry is on a strong gap out of the triangle (and above 20MA), and this feels like a "take profit along the way" kind of setup rather than a yolo-to-the-moon type of deal.

Stop is if price reverses back into the triangle (and below 20MA)--as should always be the case, position size should be defined by loss tolerance.

First exit would be low 1000's where there's some price volume, and especially if 50MA provides resistance. Second exit is around the ~1050 price volume. Third exit would be running up to high in the low 1100's high.

Unrelated, hopefully y'all made use of 200MA providing support.

Price volumes better illustrated below on the histogram. For options traders, note the decreasing volatility environment and generally mid-level IV. Unless there's properly mad price action this setup probably won't realize too much upside from volatility growth. So...it might be a good thought to investigate horizontal/diagonal spreads.

 

[ReddyLeaf]

This being the technical thread, there's a pretty good technical setup forming here. Good ascending triangle consolidating over the past few days that's fixin' to layer on top of 20MA. Ideal entry is on a strong gap out of the triangle (and above 20MA), and this feels like a "take profit along the way" kind of setup rather than a yolo-to-the-moon type of deal.

Stop is if price reverses back into the triangle (and below 20MA)--as should always be the case, position size should be defined by loss tolerance.

First exit would be low 1000's where there's some price volume, and especially if 50MA provides resistance. Second exit is around the ~1050 price volume. Third exit would be running up to high in the low 1100's high.

Unrelated, hopefully y'all made use of 200MA providing support.

View attachment 766980

Price volumes better illustrated below on the histogram. For options traders, note the decreasing volatility environment and generally mid-level IV. Unless there's properly mad price action this setup probably won't realize too much upside from volatility growth. So...it might be a good thought to investigate horizontal/diagonal spreads.
View attachment 766982

Thanks bxr. Great post. I’ve been watching this triangle as well, but don’t have a strong TA background. This setup doesn’t feel very certain and I’m hesitant to trade it. Agreed on the 20d SMA. My guess is that the MM/Hedgies keep riding it down as long as possible. IV, while seemingly lowish, doesn’t seem quite low enough. I’m still waiting, probably another week or two before attempting call buying. Instead, I’m selling weekly strangles. I’ve been successful with -p900s/-c955s for the past two weeks, but next week “feel” more uncertain, so will roll the -p900 on Friday, but wait on the CCs, maybe widen to -c980 or -c1000. Until there’s a major catalyst (Ukrainian invasion, Austin opening, macro up/down, split announcement, etc), it feels like the SP will continue riding the 900-950 channel. Hoping to be wrong.

 

[bxr140]

This setup doesn’t feel very certain and I’m hesitant to trade it. I’m still waiting, probably another week or two before attempting call buying.

So its important to go back to the fundamental [no pun] logic of technical trading. You enter on a signal; you exit on a signal. You do not enter a position without also knowing both your stop and your exit. If you're entering a position without a stop and an exit, you're investing, not trading. You're simply hoping price goes your way eventually.

Agree this one isn't quite as strong as, for instance, the 200MA bounce a few weeks ago, but its setting up nicely all the same. The main thing though is that its a setup, and not in itself a signal. The best signal (in this scenario) is a strong break out of the consolidation, like a morning gap up. A lazy meandering up and out of the consolidation is NOT an entry signal, as the probability of a reversal is higher with that kind of price action--so the play in that scenario is to simply not do anything and wait for the next setup.

FTR a much higher risk entry signal would be entering on confirmation of the lower trendline (= touch and reverse). I'll do that sometimes with stronger indicators but not with this particular set up. The idea there is (obviously) to enter at a lower price than waiting for the gap out (in this case); the risk is that because its much weaker than the gap out it could be a premature entry. That's important to understand, as there's also a [slightly weaker] short entry signal if the price gaps down below the lower trendline of the triangle. So if you enter too soon and then the break happens but it happens as a gap down, you're not just going to open at a loss, you may gap below your stop loss and thus you may realize even more loss than you allocated.

Basically, the idea with this (and any setup) is that you're waiting for something to happen before doing anything by waiting for the strong entry signal. By entering prematurely you might realize more profit, but at that point you're basically gambling that what you want to happen is actually going to happen. Gambling != trading.

Anyway, I'd strongly suggest reconsidering the mentality of "I'll wait another week or two before call buying". If you don't like a setup for whatever reason, a much more successful mentality is "I'll wait until the next setup forms". Don't define it by calendar days.

Instead, I’m selling weekly strangles. I’ve been successful with -p900s/-c955s for the past two weeks, but next week “feel” more uncertain, so will roll the -p900 on Friday, but wait on the CCs, maybe widen to -c980 or -c1000. Until there’s a major catalyst (Ukrainian invasion, Austin opening, macro up/down, split announcement, etc), it feels like the SP will continue riding the 900-950 channel.

So--and I'll temper my actual thoughts to more muted, family friendly language here so as to not overly offend anyone's sensibilities here--selling a strangle with strikes on a consolidating channel is ****ing insane.

If there's one single thing that's more inevitable in the stock market than pretty much anything else, its that price consolidation eventually breaks. Often that break is the result of just one of a litany of catalysts, some of which you've accurately outlined, and in many cases the temporal/X-axis element of that catalyst is completely unpredictable. Selling in general is a game of "I hope nothing big happens between now and expiration", where you're hoping exactly zero of the many catalysts trigger. Selling a tight strangle around a consolidating channel--beyond doubling your chances of losing (since a break in either direction screws you over)--is basically saying "I don't think any of those unpredictable catalysts are going to come to bear before my expiration.

If just one of those catalysts to...uhh...catalyze, the short position goes teakettle. Why not simply wait for that same just one of those catalysts to signal a long entry?

Its also worth noting that selling a ~$50 wide strangle is like saying "I don't think TSLA is going to go up OR down ~3% between now and expiration". Step back and think about that--Less than +/-3% over many days if not a week or more. FTR, since I have the data at the ready, the average magnitude of TSLA price action from Friday close to Friday close is 5.7%. (Median is 4.6%). Sorted a different way, 66.8% of the time TSLA moves more than +/-3.0% friday-to-friday. So, and obviously depending on exactly when you enter, your weekly strangle more or less has a 2:1 chance of losing from a broad statistical analysis, and that's not even considering its sold against consolidating price action that is inevitably going to break...

 

[ReddyLeaf]

Thanks @bxr140 for being so blunt! I actually was able to understand most it and it will certainly help me and others. I’m always willing to learn.

 

[jeewee3000]

So its important to go back to the fundamental [no pun] logic of technical trading. You enter on a signal; you exit on a signal. You do not enter a position without also knowing both your stop and your exit. If you're entering a position without a stop and an exit, you're investing, not trading. You're simply hoping price goes your way eventually.

Agree this one isn't quite as strong as, for instance, the 200MA bounce a few weeks ago, but its setting up nicely all the same. The main thing though is that its a setup, and not in itself a signal. The best signal (in this scenario) is a strong break out of the consolidation, like a morning gap up. A lazy meandering up and out of the consolidation is NOT an entry signal, as the probability of a reversal is higher with that kind of price action--so the play in that scenario is to simply not do anything and wait for the next setup.

FTR a much higher risk entry signal would be entering on confirmation of the lower trendline (= touch and reverse). I'll do that sometimes with stronger indicators but not with this particular set up. The idea there is (obviously) to enter at a lower price than waiting for the gap out (in this case); the risk is that because its much weaker than the gap out it could be a premature entry. That's important to understand, as there's also a [slightly weaker] short entry signal if the price gaps down below the lower trendline of the triangle. So if you enter too soon and then the break happens but it happens as a gap down, you're not just going to open at a loss, you may gap below your stop loss and thus you may realize even more loss than you allocated.

Basically, the idea with this (and any setup) is that you're waiting for something to happen before doing anything by waiting for the strong entry signal. By entering prematurely you might realize more profit, but at that point you're basically gambling that what you want to happen is actually going to happen. Gambling != trading.

Anyway, I'd strongly suggest reconsidering the mentality of "I'll wait another week or two before call buying". If you don't like a setup for whatever reason, a much more successful mentality is "I'll wait until the next setup forms". Don't define it by calendar days.



So--and I'll temper my actual thoughts to more muted, family friendly language here so as to not overly offend anyone's sensibilities here--selling a strangle with strikes on a consolidating channel is ****ing insane.

If there's one single thing that's more inevitable in the stock market than pretty much anything else, its that price consolidation eventually breaks. Often that break is the result of just one of a litany of catalysts, some of which you've accurately outlined, and in many cases the temporal/X-axis element of that catalyst is completely unpredictable. Selling in general is a game of "I hope nothing big happens between now and expiration", where you're hoping exactly zero of the many catalysts trigger. Selling a tight strangle around a consolidating channel--beyond doubling your chances of losing (since a break in either direction screws you over)--is basically saying "I don't think any of those unpredictable catalysts are going to come to bear before my expiration.

If just one of those catalysts to...uhh...catalyze, the short position goes teakettle. Why not simply wait for that same just one of those catalysts to signal a long entry?

Its also worth noting that selling a ~$50 wide strangle is like saying "I don't think TSLA is going to go up OR down ~3% between now and expiration". Step back and think about that--Less than +/-3% over many days if not a week or more. FTR, since I have the data at the ready, the average magnitude of TSLA price action from Friday close to Friday close is 5.7%. (Median is 4.6%). Sorted a different way, 66.8% of the time TSLA moves more than +/-3.0% friday-to-friday. So, and obviously depending on exactly when you enter, your weekly strangle more or less has a 2:1 chance of losing from a broad statistical analysis, and that's not even considering its sold against consolidating price action that is inevitably going to break...

I would nominate this for post of particular merit but I know that won't happen since trading is frowned upon in the main thread.

 

[Discoducky]

I would nominate this for post of particular merit but I know that won't happen since trading is frowned upon in the main thread.

@adiggs How about the options wiki?

 

[adiggs]

@adiggs How about the options wiki?

Absolutely - consider it done. I'll figure out some sort of title / description for it. Please improve on what I put in @bxr140.

EDIT to add - added a link down at the bottom in the collection of more detailed posts.

 

[ReddyLeaf]

This being the technical thread, there's a pretty good technical setup forming here. Good ascending triangle consolidating over the past few days that's fixin' to layer on top of 20MA. Ideal entry is on a strong gap out of the triangle (and above 20MA), and this feels like a "take profit along the way" kind of setup rather than a yolo-to-the-moon type of deal.

Ok, now with Friday’s gap out, unfortunately down instead of up, is this setup no longer valid? Or should we expect a continued dropping SP in line with the longer 1-2 month trend? I’m positioned both ways, though more heavily weighted to take advantage of a SP rise (just a quick return to MaxPain for Friday, pretty please ).

 

[MABMAB]

These are absolutely horrible times to be playing the market. Some the stuff here sure reads like gamblers. This is death by a thousand cuts kind of time.

 

[bxr140]

Ok, now with Friday’s gap out, unfortunately down instead of up, is this setup no longer valid?

Yes, exactly! The setup indicated something could happen. That thing didn't happen, so the setup is spent. To be clear the setup sent a [much weaker] short signal from the resistance at 20MA and then the drop out of the triangle...but that's a position only the pro day traders would take.

The good news is, these are absolutely great times to be looking for technical setups. Technical analysis is all about seeing probability through the chaos; in very volatile times like these the setups/triggers can actually come faster and return faster than in more stable price action.

As for what's coming up, I'm looking at two entries:
1. ~950 is still shaping up to provide some resistance. I'm looking for it to hold resistance until 50MA can come down (currently at ~990) to ~950. Then I'm looking for a strong break above those overlapping indicators as a entry. Exits are still as described upthread.
2. If we double bottom at ~800 and then rebound back above 200MA (ideally, similar to the hammer-ish candle on 1/28), that's another entry for me. Entry would be around 850 or maybe even lower; in a best case scenario entry is when a big lower wick comes back up to open price like it did on 1/28. I'd be looking to exit somewhere between 900-950, depending on how the days between now and then shape up.

(just a quick return to MaxPain for Friday, pretty please ).

Bit soapboxy here, and I've bloviated on this in the past, but I don't love Max Pain as a technical indicator. It is as accurate as finding the exact deepest part of the lap pool, so to speak. The fundamental max pain logic definitely closes so I don't take issue there, but the problem is that a pretty significant price offset from MaxPain still returns AlmostMaxPain...and so if one is using the actual max pain price as some kind of target (for instance, a short strike), they're taking on a TON of risk. For instance, max pain is $945 for this week...but pretty much everything from $900-1000 is more or less the same end result.

What I do find useful from the people at Max Pain is their OI and volume charts, as I've found that big call/put walls can influence underlying price far more than the actual point of max pain. Obviously there's no magic there as its all just straightforward data, but the way MP presents that data is more useful than most.

 

[ReddyLeaf]

Perfect @bxr140. Looks like I’m beginning to understand a bit. Agree on everything, including MaxPain. Useful charts and love the pool analogy. I’m definitely watching for touching the 200d SMA as well as convergence of the 50d, 100d and upper BB. Ukraine catalyst lower, Austin catalyst higher, or something completely unexpected. Interesting times indeed.

 

[MABMAB]

I've recently advocated folks taking a look at the market from a top down perspective, the kind of thing taught in the things I've read. Another thing to follow is how other market leaders are fairing.

Shopify has been just such a leader. It was a Motley Fool pick and I've seen some momo folks talk it up. I could not come up with a back of napkin analysis for it so never made an entry (I have to come up with good reasons to buy and hold when times get tough). Now everyone seems to be running for the exits.

What does this mean? Maybe nothing, but I take it to be additional evidence of market conditions that favor sideways or down market action.

 

[Stars aligned]

Next leg down might reach ≈ 700

 

[phantasms]

Anyone down there?

 

[OrthoSurg]

Anyone down there?

Not after Cory TA analysis showing we are going down for a prolongue bear market if we go through 857 then 827 support levels. Russia/Ukraine/USA conflict might send us in a prolonged bear market. Kay Kim also sounded bearish af.

 

[Mike Da Gee]

A log plot of the NASDAQ shows we're at the upper side of a 50-year long channel. The only thing worse than it going down would be it going up. The dot-com bubble of 2000 took many years to recover from and I for one have no interest in seeing another such bubble.

There are various theories about "why Ukraine" and "why now?" I would argue the Ukraine doesn't really matter because the market has been showing weakness for a while. True, Russia supplies the US and Europe with a lot of oil, and natural gas, but the stock market started weakening before everyone suddenly remembered there is a Ukraine.

Comparing the NASDAQ ETFs QQQ (purple line below) and QQEW ("Equal Weight" = light blue line) shows QQEW more or less kept up with QQQ until mid year 2021 when it's momentum slowed down. So it was a few large cap stocks which kept the party going strongly - the NASDAQ-100 became more the NASDAQ-5. The loss of momentum in the other NASDAQ-95 showed up months earlier.

You can see the same idea in the chart below showing the number of stocks in the NASDAQ-100 above their 200-day mov. avg. - it drops sharply for months starting in Summer of 2021 while the NASDAQ-100 kept making new highs. Chart below from "Barchart dot com"

A YouTube TA channel, "F/X Evolution" mentioned an article circulating among financial institutions that suggested the best option for the Fed in fighting inflation without raising interest rates to a level which would devastate the economy would be to encourage volatility. Basically, scare everyone enough with market gyrations that they go from "buy the dip" to "sell the rip".

Presumably, headlines of "Dow Drops N,NNN points in One Day!!" would even make the 50% of the population that doesn't own stocks start worrying about their jobs. Then they'll stop paying outrageous prices for stuff and start saving money. That would remove pricing power from retailers and let inventories build up. This would kill inflation faster than raising interest rates which commonly take 6 months or more to show change in the general economy. If inflation is over 7%, interest rates would need to be at least that high for months to do anything - yechh - not something anyone wants to see soon.

The Fed said in their last minutes that they feel equities are too high and that contributes to inflation. I interpret that to mean that they think if people feel rich with big stock portfolios they don't mind spending a lot. Makes sense to me. So driving down the market is a logical choice. Bring on Fed. member Bullard.

A few months ago, I was thinking SPY would go down maybe 20%, now I'm thinking 20% for sure, maybe 30%. A 30% drop in SPY to 337 is about where it was in January 2020 before the big crash. TSLA was (split-adjusted) 188 back then. I have trouble imagining TSLA going that low, especially with 2 new factories churning out cars.

Personally, I'm 100% cash in my trading acct. My investment acct is 50% cash. The other 50% is HODLing TSLA, some mutual funds, TQQQ, TECL.

When Powell comes on and tells us the Fed feels inflation is no longer a problem I'll pick up more TSLA, and SOXL.

 

[Mike Da Gee]

Continuing on with the log plot of the NASDAQ composite (not the NDX-100). There are several lessons to be learned from a closer examination of it.

1. The 50-month Exponential Moving Avg. is "sort-of" support. It also can act as a base around which prices oscillate if they get too far above or below. We got waaayy above the 50-EMA in 2000 with the consequence that we went waaayy below it for several years afterwards. We've gotten a bit far from it lately and if we get back to it or slightly below that would be the 30% (+/-) drop I mentioned last post.

2. There are channels within channels. For an extended period after the NASDAQ started in 1971, we hovered around the approximate middle of the channel, the dot-com bubble being the big exception. We're way above the middle line now and if we take a year or so to get back to the (sloping upward) middle line, that would be consistent with a roughly 30% drop. We could go below the middle line by simply going sideways while the line marches up.

3. There are a lot of people new to the stock market which shows up when you look at volume since the March 2020 bottom. For those new to the stock market, stocks only go up, and "buy the dip" is the mantra. For those newcomers, I would like to point out the extended periods when HODLing took years to get back to break-even. The big kahuna is the dot-com bubble. Buying at the peak you did not get back to break-even for good for 16.5 years. (Not counting inflation, which made it worse.) There have been plenty of other periods of 7 to 10 years I show on the chart. Even if you had bought the exact bottom in 10/2002, by 3/2009, you were only slightly above break-even. There are similar periods lasting 3-5 years which I didn't bother with but you get the idea.

If you are investing in tax exempt retirement funds with a 20-30 year time horizon, dollar-cost-averaging is the way to go, in which case you probably don't care about tech, analysis. For the rest of us, in those long periods of choppy sideways motion, the only way to make money is to swing trade.

 

[Congo Line]

Continuing on with the log plot of the NASDAQ composite (not the NDX-100). There are several lessons to be learned from a closer examination of it.

View attachment 771691

1. The 50-month Exponential Moving Avg. is "sort-of" support. It also can act as a base around which prices oscillate if they get too far above or below. We got waaayy above the 50-EMA in 2000 with the consequence that we went waaayy below it for several years afterwards. We've gotten a bit far from it lately and if we get back to it or slightly below that would be the 30% (+/-) drop I mentioned last post.

2. There are channels within channels. For an extended period after the NASDAQ started in 1971, we hovered around the approximate middle of the channel, the dot-com bubble being the big exception. We're way above the middle line now and if we take a year or so to get back to the (sloping upward) middle line, that would be consistent with a roughly 30% drop. We could go below the middle line by simply going sideways while the line marches up.

3. There are a lot of people new to the stock market which shows up when you look at volume since the March 2020 bottom. For those new to the stock market, stocks only go up, and "buy the dip" is the mantra. For those newcomers, I would like to point out the extended periods when HODLing took years to get back to break-even. The big kahuna is the dot-com bubble. Buying at the peak you did not get back to break-even for good for 16.5 years. (Not counting inflation, which made it worse.) There have been plenty of other periods of 7 to 10 years I show on the chart. Even if you had bought the exact bottom in 10/2002, by 3/2009, you were only slightly above break-even. There are similar periods lasting 3-5 years which I didn't bother with but you get the idea.

If you are investing in tax exempt retirement funds with a 20-30 year time horizon, dollar-cost-averaging is the way to go, in which case you probably don't care about tech, analysis. For the rest of us, in those long periods of choppy sideways motion, the only way to make money is to swing trade.

One major factor which such historical comparisons does not take into account is rate of revenue and earnings growth. Has this remained constant over such a long period of time? People like Cathy Wood argue (rightly or wrongly) that the pace of technology development and transformative innovation has increased compared to the past. Adding some element of forward earnings expectations and growth might add more context and validity.