NASDAQ:TSLA reported quarterly earnings after hours. The initial reaction has been negative but that can sometimes change during the volatility that continues during the conference call and later the next few days.
This post will not delve into the fundamentals as a some prior posts have done. After all, markets are presumably efficient and discount all new information very rapidly, and surely algorithimic programs have already processed the report and its ramifications for the future. So the following charts will look at technical analysis alone.
From a technical perspective, TSLA had been in a large triangle that appears to be breaking over the last couple of weeks. This is true on both logarithmically scaled charts and linear / arithmetic charts. The log-scaled chart shows a somewhat bigger break so far than the linear scaled chart.
Supplementary Chart A shows a logarithmically scaled chart of this triangle.
Supplementary Chart A (Log)
Supplementary Chart B (Linear)
TSLA has been in an uptrend since its bear-market lows in early January 2023. But as prior posts have discussed, the next larger degree of trend is surely sideways, going back to the all-time highs. A simple box drawn around price on a monthly or weekly chart since even somewhat before the all-time highs shows this sideways range.
Next, consider that since the all-time high was reached, TSLA retraced to its 61.8% Fibonacci retracement and failed on its first attempt at cracking that level as shown in the next chart.
Supplementary Chart C (61.8% Fibonacci retracement)
Furthermore, TSLA has struggled mightily at its all-time high anchored VWAP. At least six major breakout attempts above this VWAP have failed since TSLA formed its all-time high. See Supplemental Chart D below, showing the all-time-high VWAP in magenta. So have the failures to succeed in a break above this VWAP exhausted themselves so that next one or two will surely succeed as the bulls might want to argue? Or have the failures only reinforced the bears' case? Until price can recover this $234 area, it's tough to be bullish on TSLA.
Supplementary Chart D
More recent anchored VWAPs also make the bull case difficult to see for the time being. These are shown in the next supplementary chart. The key levels from these VWAPs are $241.72 and $214.62.
Supplementary Chart E (Other Major VWAPs)
And price hasn't been able to poke a head above the YTD anchored VWAP either the last 3 weeks as shown in Supplementary Chart F.
Supplementary Chart F (YTD VWAP)
Finally, consider that the major 61.8% Fibonacci retracement of the current uptrend from January 2023 lies at $177.25. This is an all-important support level for bulls who think TSLA is merely consolidating its uptrend from January 2023 lows.
Supplementary Chart G (Another 61.8% Fibonacci retracement from the January 2023 lows to July 2023 highs)
These technicals don't present a trade idea or attempt to reinforce a bear or bull case for anyone who is so positioned. But it does attempt to read the technical landscape as it now stands, without any sort of bullish or bearish bias from fundamentals or macro environment. The overall case isn't bullish until key levels can be recovered. Until then, lows might be tested if price can't quickly find its way back into the consolidative safety of the triangle shown.
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Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
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Here is one more chart to keep in mind. Credit must be given to @bjorn2z for pointing this pattern out while it was still inchoate a couple weeks ago. H&S patterns can be a bit tricky as they are less reliable—and not even a valid pattern until broken. With those disclaimers aside, here is the pattern:
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TSLA has seen ongoing weakness since this post was first published. Price closed at $207.83 when this post was published showing H&S patterns as well as a triangle that broke to the downside. Prices have remained weak since then.
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A key Fibonacci retracement lies at $177, and price continues to find some support there. It's a good over/under level to watch.
Here is another way to think about it. TSLA is down 60% from its all time high WHILE Nasdaq is at its ATH. Imagine what will happen to TSLA WHEN nasdaq falls. Even after the 60% haircut TSLA is still trading at an insane valuation of PEG 6 and Fwd PE 80. I know markets can be irrational for too long. But to me, TSLA was clearly headed down in the long run. Thanks for the shout out Squish!!
SquishTrade
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@bjorn2z, You're welcome, the shout out to you was well deserved. From a swing perspective, you were definitely seeing this next move lower to 175-180 much more clearly than I was. But admittedly, the technicals have been messy and conflicting :)
bjorn2z
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TSLA is headed below 100. And then below 67. Unfortunately, I declared victory too quickly, with minimal profits, on my personal second TSLA short (rom Jul 2023 to Jan 2024. The first was from Jul 2020 to Dec 2022). I started shorting NVDA and my position management has regressed. :-( I did not implement the lessons I had learned from shorting TSLA for three years. It has been a terrible two months. I should have stayed with the TSLA short and not diverted myself to NVDA.
SquishTrade
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@bjorn2z, I'm sorry to hear. Wishing you all the luck possible.
bjorn2z
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@SquishTrade, Do you have a technical/fundamental opinion on NVDA?
SquishTrade
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@bjorn2z, Here is another technical concept about increasing steepness of trend in several degrees. I feel like NVDA has reached the third degree perhaps, just from a quick look at its chart, one can see going years back increasing degrees of steepness in the trend. Here is a chart provided on CMT_Association's post i linked above:
Even if the trend is getting steeper and climaxing doesn't mean we know just when it can stop. I'm sure everyone expect it to stop at some point, but topping seems to take longer than bottoming for many securities with a price chart. This is why I think stops and a process can be key. Risk = X and reward should be 2-5 times X. If wrong, only X is lost. Sorry I can't offer more, I know it's painful when a trade really moves against you after developing what you thought was a very strong and well-thought out argument. Markets sometimes make zero sense, and all the people that say they do and can predict the future with certainty are dead wrong if statistics were applied to their outcomes.
SquishTrade
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@bjorn2z, We haven't reached the close by any means, but the daily candle on NVDA doesn't look so great!