Hi, This is a followup idea on my original Tesla idea (linked). I would like to switch focus from Wyckoff pattern to a Market Cycle which gives a longer term perspective of what kind of behavior we can expect from Tesla stock. As we can see on the chart we have already passed COMPLACENCY phase of the cycle while stock has been distributed for 2 years. Critical support - ICE at $250 has been broken triggering sell off an quick drop to a previous support area at around $180. At that support lots of buyers, who still believe that the company's nearest future is bright, were sitting and waiting for the opportunity to buy at a cheaper price. That marks the next phase of Market Cycle - DENIAL. So far investors deny to see that the company (even if cars are good) is struggling financially and potentially needs to restructure its operations/management to value investors' money more. They deny to see that many investors purchased this stock at the price above ICE level (above $250) and still holding - waiting to sell their positions at minimal loss.
Now, when the price came back to $250-ish area where greed and fear meet we are witnessing ANXIETY phase of Market Cycle. Those who underwater eager to sell. Those who bought at $180 want to minimize the risk and don't want to buy at this level waiting for a break but ready to take profit. Considering time the TSLA price spent distributing above $250 I think we are not out of the woods yet. Following market cycle price will be rejected and drop below $180 in a fast and furious sell off. PANIC phase is next which will happen when investors realize that price is not going to break $250 resistance. September is coming to an end this week and as we can see monthly candle is bearish pin, so I assume panic phase will begin soon.
It is too early to invest into Tesla yet. Market Cycle suggests we are at the middle of the drop and we will have at least 2 years of struggle before we can start building a bullish case.
Good luck!
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Hi, I would like to start with confession - I did not expect price to break $270. It surprised many though. I prepared a 15 minutes chart and try to explain what I think is happening. First thing to mention that TSLA jumped up with a GAP of 20% on positive earnings. Can these earnings justify 20% stock increase? - I will leave it to fundamental experts. Also, I cannot say that stock was severely undervalued and it is a relief rally.
I will focus on a chart and volume and try to guess what was going on. The 20% rally was made in aftermarket - its a thin market general public has limited access to it. So it takes much less effort to move the price than during the day and mostly done by professionals.
Oct 24 - market opens 20% up. Wast majority of bears already robbed and have to cover they can do nothing - they are buying at expensive (relative to previous day/weeks) price. Folks like me who were waiting for at least double bottom or even lower prices are afraid to miss the train and some of them jump in.
First 15 minutes despite of huge volume of scared buying people price is not moving up. In fact it moves down $1.6 billion. Who are selling nice "life changing" earnings? 1) professionals who already long from 200ish taking profit - they need buyers in bulk buying at great price. 2) Public folks who bought TSLA at 300 ish last year but somehow managed not to sell at $180 - all the want is to get out at no loss. 3) Brand new bears who just making position.
First 1h $3 billion worth of stock exchanged hands - candle is red pin. Means seller absorbed all panic buyers. I don't think that is bullish.
Next couple days is a aftermath days professionals already took most of profit from long position not need to decide what to do. So price may stay elevated for a longer period of time while new positions are made.
Looking at 15 minutes price and volume analysis I can identify some selling areas. So I believe that Stock price will comeback and try to close the gap. Let's see how gap holds.
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*Noticed a typo on a screenshot it is 3bln - not 13.
TSLA is speculative and crazy by itself, don't trust it :)
sharl92
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Lol
appletwo
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updates?
pbartashevich
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@appletwo, I will update when I see at least daily candle. I would like to see if this 20% gap up bullish or big sellers just want to get out at higher prices using positive earnings. We should keep in mind that rising price in after market is much cheaper than during the day.
appletwo
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@pbartashevich, so? now there's quite a few daily candles. Is your idea invalidated? It's a common mistake to be utterly bearish at the lows (180 in this case)... Or will your idea prove eventually correct (question is when, next recession)?
appletwo
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@appletwo, also you previously said that the stock will do what you said/follow its on path no matter what the company does which to me is a bit nonsensical...
pbartashevich
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@appletwo, check linked idea to see when I started to be bearish and why before you say about 180 price level. I tried to find your views but looks like you haven’t published them yet. The reason I did not published update is I see lots of selling into positive quarter, so not sure if tsla has a bright future yet to invalidate this particular long term idea. When price was capped up 20% we know who were buyer that day.
@pbartashevich, yeah I look at some ideas but I don't pretend to be a pro so not publishing any... Anyhow wanted to buy Tesla at 180, made sense as long term support but your views held me back and I missed the boat... So any real update on your side?
pbartashevich
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@appletwo, I am not a pro. I am posting what I see so others can criticize it and we can have a healthy conversations. To be honest I did not expect price to break 270 level or even 250. It did. But it did it with a gap - means buyers has not absorbed high volume selling at lower price. I will prepare an update with my thoughts. Long story short TSLA still not good for investing, especially at this levels.