After my idea about a correction in
TSLA
, it's time for a follow-up. There is strong support at $560, while our target for 2021 is above $1200. So it makes sense to buy and buy aggressively at these levels. I see pre-market today opening lower than last close, but that doesn't bother me at all. The scare from rising interest rates is already priced in and has already taken effect over the past two weeks.
Do not over-lever your trade. That's just my opinion. The absolute low in my estimation is at $440. So if you lever 5:1 for example, you might easily get liquidated.
Dow Jones (
DJI
) has room to fall until 27000. That's a 10% drop from current levels. See the following chart.
But the S&P500 has only 8% room to fall before it reaches major support. Judging by previous drops, that usually translates to a 16% drop in TSLA, which takes us to $560.
Conclusion: TSLA is at a strong buy in my opinion right now and all the way down to $560. The risk is low but the reward is high short-term and extremely high long-term.
TSLA
, it's time for a follow-up. There is strong support at $560, while our target for 2021 is above $1200. So it makes sense to buy and buy aggressively at these levels. I see pre-market today opening lower than last close, but that doesn't bother me at all. The scare from rising interest rates is already priced in and has already taken effect over the past two weeks. Do not over-lever your trade. That's just my opinion. The absolute low in my estimation is at $440. So if you lever 5:1 for example, you might easily get liquidated.
Dow Jones (
DJI
) has room to fall until 27000. That's a 10% drop from current levels. See the following chart.
But the S&P500 has only 8% room to fall before it reaches major support. Judging by previous drops, that usually translates to a 16% drop in TSLA, which takes us to $560.
Conclusion: TSLA is at a strong buy in my opinion right now and all the way down to $560. The risk is low but the reward is high short-term and extremely high long-term.
Comment:
I suppose a reversal will happen soon. Probably, tomorrow will open gapping down, touching our target and support area of $560 to $570, and then will start to rise soon after open. That is very fitting in my opinion.
Also we see RSI divergence as a sign of reversal.
I suppose a reversal will happen soon. Probably, tomorrow will open gapping down, touching our target and support area of $560 to $570, and then will start to rise soon after open. That is very fitting in my opinion.
Also we see RSI divergence as a sign of reversal.
Comment:
We reached the target and rather quickly. The strength of the momentum suggests we don't miraculously stop and reverse here, but it suggests we easily reach $480.
We reached the target and rather quickly. The strength of the momentum suggests we don't miraculously stop and reverse here, but it suggests we easily reach $480.
Comment:
I need to see this happen to be convinced that this is a bullish momentum, not a dead cat bounce. Of course this is a lagging indicator but I can't do better on the 10-minute chart.
On a longer time-scale, I would point your attention to tech stocks in general. In my opinion, TSLA is not too much of a speculative stock, just to be clear. So I won't compare it to speculative stocks, but rather I will compare it to AAPL, AMZN, GOOG and FB.
Notice that 10-year bond yields have gone up so much recently that they are finally on an equal level with the S&P500 dividend yield. This should slow down the drop in stock market in general. At the same time we see dividend stocks, take AT&T for example, still rising. So I'm looking towards some stability in tech stocks, but not a reversal.
Also the Fed is not likely to take any action any time soon, so there is no foreseeable fundamental change in the macro situation.
I need to see this happen to be convinced that this is a bullish momentum, not a dead cat bounce. Of course this is a lagging indicator but I can't do better on the 10-minute chart.
On a longer time-scale, I would point your attention to tech stocks in general. In my opinion, TSLA is not too much of a speculative stock, just to be clear. So I won't compare it to speculative stocks, but rather I will compare it to AAPL, AMZN, GOOG and FB.
Notice that 10-year bond yields have gone up so much recently that they are finally on an equal level with the S&P500 dividend yield. This should slow down the drop in stock market in general. At the same time we see dividend stocks, take AT&T for example, still rising. So I'm looking towards some stability in tech stocks, but not a reversal.
Also the Fed is not likely to take any action any time soon, so there is no foreseeable fundamental change in the macro situation.
Comment:
What I was waiting for did not happen. I wanted to see a higher low then a higher high. But we got stuck at the previous high.
What I was waiting for did not happen. I wanted to see a higher low then a higher high. But we got stuck at the previous high.
Comment:
Zooming out a bit and back to the daily chart, I have some concerns regarding the slow and consistent decline and the Fed's reaction. TLDR below.
1. Originally, I was expecting a drop as fast as previous ones. So it shouldn't last more than 3 weeks. But it did. It lasted more than a month, regardless where you consider its start. You might think that this is support and a sign of strength, but I am hesitant to consider it so. The way I look at it is: the quicker the shock propagates and affects the price, the quicker the recovery. Not only that, but when the rise is quicker than the drop, it is more likely a dead cat bounce. That is why I drew two paths: a quick one that loses steam quickly and a slow one that lasts longer.
2. A slow drop shows consistency with rising rates. It's not like the fear shocked the market and investors re-evaluated, executed the new evaluation and were done with it. No, it's rather consistent continuous re-evaluation day by day. Every day the rates rise more, TSLA drops more. So, more rising rates means more drops in TSLA. And if TSLA drops below the broadening wedge, I would simply lose my bearing as a trader and face difficulty determining the bottom.
3. The Fed have explicitly stated that they won't interfere with rising rates. I haven't yet found signs that rates have topped. So I'm concerned that they will continue rising. And that of course will continue to push TSLA lower.
On the bright side, there is a threshold where value investors start considering TSLA price lucrative. After all, TSLA is rolling out a subscription service in Q2 and is considered a SAAS business next to being an auto manufacturer, battery manufacturer, solar cell manufacturer, and Insurance provider. These standing businesses as of now are worth more than the current market cap of TSLA. I'm not speculating about the future. I'm talking about the current valuation. This of course needs better research that I haven't done myself. If you happen to have come across a deep and recent valuation report of Tesla, please share it in the comments.
One more factor to consider. As mentioned two comments ago, the 10-year bond yield has come up to match that of the S&P500 dividend yield 3 days ago. Usually stocks being the riskier asset have a higher yield. So the current situation is unusual, but not unprecedented. Yet it's not really clear to me how that will affect TSLA. If there isn't enough demand on 10-year bonds, and the demand is going towards the S&P 500, then it will go to dividend yielding bonds. The value bonds. And let's not get started on how many of these are going in debt just to keep up their dividends. It's all a bit smelly and vague. Let me know your thoughts about that.
TLDR:
Concerns:
1. Drop was slow. So rise will be slow.
2. A fast rise is fake.
3. Fed will not combat rising rates.
4. New highs in rates means new lows in TSLA.
Bright side:
Tesla's value as a business will bring demand to the stock despite rising rates.
Please share your thoughts. Thank you.
Zooming out a bit and back to the daily chart, I have some concerns regarding the slow and consistent decline and the Fed's reaction. TLDR below.
1. Originally, I was expecting a drop as fast as previous ones. So it shouldn't last more than 3 weeks. But it did. It lasted more than a month, regardless where you consider its start. You might think that this is support and a sign of strength, but I am hesitant to consider it so. The way I look at it is: the quicker the shock propagates and affects the price, the quicker the recovery. Not only that, but when the rise is quicker than the drop, it is more likely a dead cat bounce. That is why I drew two paths: a quick one that loses steam quickly and a slow one that lasts longer.
2. A slow drop shows consistency with rising rates. It's not like the fear shocked the market and investors re-evaluated, executed the new evaluation and were done with it. No, it's rather consistent continuous re-evaluation day by day. Every day the rates rise more, TSLA drops more. So, more rising rates means more drops in TSLA. And if TSLA drops below the broadening wedge, I would simply lose my bearing as a trader and face difficulty determining the bottom.
3. The Fed have explicitly stated that they won't interfere with rising rates. I haven't yet found signs that rates have topped. So I'm concerned that they will continue rising. And that of course will continue to push TSLA lower.
On the bright side, there is a threshold where value investors start considering TSLA price lucrative. After all, TSLA is rolling out a subscription service in Q2 and is considered a SAAS business next to being an auto manufacturer, battery manufacturer, solar cell manufacturer, and Insurance provider. These standing businesses as of now are worth more than the current market cap of TSLA. I'm not speculating about the future. I'm talking about the current valuation. This of course needs better research that I haven't done myself. If you happen to have come across a deep and recent valuation report of Tesla, please share it in the comments.
One more factor to consider. As mentioned two comments ago, the 10-year bond yield has come up to match that of the S&P500 dividend yield 3 days ago. Usually stocks being the riskier asset have a higher yield. So the current situation is unusual, but not unprecedented. Yet it's not really clear to me how that will affect TSLA. If there isn't enough demand on 10-year bonds, and the demand is going towards the S&P 500, then it will go to dividend yielding bonds. The value bonds. And let's not get started on how many of these are going in debt just to keep up their dividends. It's all a bit smelly and vague. Let me know your thoughts about that.
TLDR:
Concerns:
1. Drop was slow. So rise will be slow.
2. A fast rise is fake.
3. Fed will not combat rising rates.
4. New highs in rates means new lows in TSLA.
Bright side:
Tesla's value as a business will bring demand to the stock despite rising rates.
Please share your thoughts. Thank you.
Comment:
Like I said, a quick rise in TSLA is fake. Today's rise, which I'm sure is well celebrated by all, is a staggering 19%. Other prominent tech stocks have risen but not half as much. This suggests that the demand on TSLA is much higher than the demand on tech/growth stocks in general. However, my problem with this is that there was not enough time given to build up pressure before the explosion. I need to see resistance around the $730 zone just like my chart indicates. Then a slow rise to $780. From there I will re-evaluate.
The second thing to note here is that US10Y (the 10-year bond yield) has had a drop today. But the drop is only -3.8%. This coincided with TSLA's 19% rise. Compare that to the action on 26 March to 1 Feb US10Y dropped -7%, yet TSLA rose only 5%. Then there are other factors that we need to discover in order to judge and estimate future price movements.
Could that be the rising dollar measured by DXY? Does DXY dropping contribute to TSLA rising? Well, again, judging by the recent 1% drops in DXY on 4-7 Feb and 18-22 Feb, TSLA does not seem to have risen in response. Today's DXY drop of only -0.38% coincides with 19% rise in TSLA.
What factor could we be missing? Did the market simply bottom? Did everyone realize suddenly that the economy is actually strong and that this drop wiped many harmful levered longs to give way to steady long-term growth?
Let me know what I'm missing.
Like I said, a quick rise in TSLA is fake. Today's rise, which I'm sure is well celebrated by all, is a staggering 19%. Other prominent tech stocks have risen but not half as much. This suggests that the demand on TSLA is much higher than the demand on tech/growth stocks in general. However, my problem with this is that there was not enough time given to build up pressure before the explosion. I need to see resistance around the $730 zone just like my chart indicates. Then a slow rise to $780. From there I will re-evaluate.
The second thing to note here is that US10Y (the 10-year bond yield) has had a drop today. But the drop is only -3.8%. This coincided with TSLA's 19% rise. Compare that to the action on 26 March to 1 Feb US10Y dropped -7%, yet TSLA rose only 5%. Then there are other factors that we need to discover in order to judge and estimate future price movements.
What factor could we be missing? Did the market simply bottom? Did everyone realize suddenly that the economy is actually strong and that this drop wiped many harmful levered longs to give way to steady long-term growth?
Let me know what I'm missing.
Comment:
I'm happy that the major support line I called at $560 did coincide with such a massive reversal.
I'm happy that the major support line I called at $560 did coincide with such a massive reversal.
Comment:
TSLA is giving us another chance to buy. Will follow up on this path.
TSLA is giving us another chance to buy. Will follow up on this path.
Comment:
So far so good.
So far so good.
Comment:
The triangle has broken upwards, price uses the top of the triangle as support, and we're good to go. If this happens tomorrow and price reverses off the support line, then it's a healthy sign. It does not mean that TSLA will shoot to $780 soon. It only means that we should not fear sinking below the triangle. A possible scenario is that price keeps using this descending line as support, bouncing off of it one or two more times, which is at lower prices than current price, but all these are bullish signs, because it establishes the strength of the support line. At the same time, the broadening wedge is ascending and that is strong support that will catch up. All these are reasons to be bullish now.
I don't see any reasons to be bearish at the moment.
The triangle has broken upwards, price uses the top of the triangle as support, and we're good to go. If this happens tomorrow and price reverses off the support line, then it's a healthy sign. It does not mean that TSLA will shoot to $780 soon. It only means that we should not fear sinking below the triangle. A possible scenario is that price keeps using this descending line as support, bouncing off of it one or two more times, which is at lower prices than current price, but all these are bullish signs, because it establishes the strength of the support line. At the same time, the broadening wedge is ascending and that is strong support that will catch up. All these are reasons to be bullish now.
I don't see any reasons to be bearish at the moment.
Comment:
Right on point.
Right on point.
Triangle breakdown gives a target of $574. That's near our support zone of $560 to $570.