TSLA Caught in Vortex of Conflicting Technicals

已更新

Primary Chart: TSLA's 2D Price Chart with .618 Fibonacci Retracement of Decline from All-Time High to Jan. 2023 Low and Various Degrees of Trend Represented by Conflicting Channels

SUMMARY:
1. TSLA's technicals are unclear and conflicting. The trend from the 2021 all-time high remains downward until broken. The trend from the January 2023 low remains upward but somewhat choppy and unstable. The trend from the July 2023 high remains choppy and downward until broken.
2. Institutional buying into year end may be supportive of prices, allowing short-term traders to buy dips to well-defined support / risk levels into early January 2024. Until more structural change occurs providing more clarity, it's difficult to have confidence in any trend other than the shortest ones.
3. Once the next multi-month trend move occurs, some may look back and say that its was obvious and inevitable, offering post hoc arguments based on data that can be manipulated to support opposite outcomes. But today, unambiguous data pointing to a clear directional outcome is lacking (especially on intermediate and longer-term time frames).
4. Severely inverted yield curves suggest pressure on the economy and equity markets in the coming year or two. But as the lessons of the dot-com crash have taught us, markets can rally violently into their own recessionary demise.

The downward channel from the July 18, 2023, swing high has been the only pattern working lately. The last decline in late October 2023 was bought, and this dip fell to support at the downward sloping parallel channel. Bulls may see this as a bull flag, and it might be, but a breakout above the downward-sloping trendline from TSLA's all-time high stands in the way of a potential flag-breakout. Further, bears may reasonably see the channel from January 2023 as a bear flag within the larger downtrend from 2021. These conflicting technicals are worth watching over the coming weeks and months for resolution.

Supplementary Chart A

If one zooms out on TSLA's chart and looks at the past two years of price action, price action has largely been sideways in a trading range. This is despite the vicious decline starting November 2021 and lasting for over a year as well as the violent rallies and choppy uptrend in 2023. This sideways range seems to contain both the bear and bull markets of 2021-2023. Trading ranges are also known as chop, which is why trends on all time frames have likely been less predictable, disappointing many traders and investors during this time unless they have major equity cushions from many years ago or trade only the shorter time frames.

Supplementary Chart B

Because the larger degree trends over a two-year to three-year period has been primarily sideways, the trends within it have been less reliable and more likely to chop up TSLA investors.

Anchored VWAPs shown below also confirm this analysis of choppy, sideways action that is less predictable overall. Over the past year, notice all the failed breakouts above and below the key VWAPs anchored to major turning points. There are many.

Supplementary Chart C

Supplementary Chart D

Supplementary Chart D shows how the moving averages also are tangled, messy and sideways, presenting conflicting signals.

In conclusion, TSLA's technical charts remain conflicted and unclear. Many disciplined traders or investors with a short-term to intermediate-term time frame may wish to define risk clearly and keep losses small or else stay away. The Primary Chart reveals just how challenging TSLA's price action is for trend traders and investors. A downtrend from TSLA's all-time high remains unbroken as the downward sloping parallel channel shows. An uptrend from TSLA's January 2023 low also remains relatively stable despite the volatility seen this year. And a 4-month downtrend channel has been in play since July 2023. Any one of these technical trendlines could break one way or the other, but as of Thanksgiving, none have been broken and these data points remain unavailable for market participants wanting long or short exposure to TSLA.

What should traders and investors do? Some may vent the useless nature of a post that says a stock can go up, down or sideways on intermediate to long-term time frames. Others may see that TSLA doesn't have a clear directional play except on the shortest time frames, which is based on the currently available data. So perhaps wait patiently for more data and simply do nothing—the hardest thing for fidgety trader and DIY investor types, right? Those sitting on a large equity cushion may wish to tighten stops a bit to $200 (assuming their entries are much lower). Those with no position may want to just wait for more clarity.

Short-term traders who believe institutional flows into year end will buoy markets broadly and lead to higher prices into year end (and first week of January 2024) may wish to keep an eye on critical support at $200-$220 evidenced by the green VWAP anchored to October 2023 lows as shown on the Primary Chart. If this author were to have a bias, it would lean in this direction into year end and early January 2024, but it's a weak bias that can't be strongly held.

Such a thesis, like any other trading viewpoint, isn't guaranteed at all even though it may have a reasonable probability of being correct. This is why a stop (risk level) is needed. Upside targets in such a scenario would require a decisive move above the .618 Fibonacci retracement level and for that level to hold first. It's possible that the move off October 2023 lows could be consolidated first, where bullish TSLA traders may watch $200-$220 support levels. If a dip were to create a better entry for traders into year end, then upside targets might be considered as follows:

Conservative: $250-$255
Aggressive: $275-$280
Extremely Aggressive: $300-$310

As always, risk should be well managed so that the reward / risk ratio remains higher and the losses kept small. And keep in mind that TSLA-related news catalysts, including the ones from this past week, may have a tendency to yank price around and create formidable volatility.

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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.

註釋

The anchored VWAPs can coincide with other levels in surprising ways. The above post shows $242-$243 as a major resistance level based on a .618 Fibonacci retracement (Primary Chart), a VWAP anchored to the high on July 2023 (Magenta VWAP), and the 50-day SMA (Supplementary Chart D above).

One more level comes in right in the $240-$244 area—the base (or neckline) of the head and shoulders that governed bearish trade in 2022. That level is shown below along with the VWAP from the July 2023 high and the .618 Fibonacci retracement:

Based on some of the discussions in the comments below, it may be prudent to remind readers that the edge this post gives to upside rather than downside is considered only slight given the conflicting signals across various technical data points. Any upside is obviously conditioned on a break / hold above $240-$244

註釋

The $240-$244 level mentioned in the last update has been a source of resistance and supply the last two days. This is evidenced by the upper candle wicks showing significant supply at this level and an inability to hold / close above it. It's tough to expect even modest upside while stuck below this zone.

註釋

Upside / downside levels to watch during the next several sessions:

註釋

It appears that TSLA was the highest volume stock for the day despite making only limited upside progress and basically churning in a tight range all day. Volume was about 111 million shares traded.

註釋

Like yesterday, TSLA's volume is absolutely stunning today. It's not even close as TSLA is by far the most active volume leader at about 116 million shares traded so far in the session and the power hour into the close hasn't even started.

TV's heatmap shown below (using Volume*Price as the sizing metric):
tradingview.com/heatmap/stock/

註釋

TSLA is pushing above the key technical zone discussed above at $242 (.618 Fibonacci level) and $243 (YTD anchored VWAP). Another .618 Fibonacci level comes in in this area as well but that covers a shorter time frame of price swings. Can TSLA hold above this zone and VWAP?

註釋

Here is a very newsworthy update on 's fundamental side from one of my favorite fundamental follows NordicVetMBA

"On the fundamentals side, 3,000 car dealers signed a letter demanding the Biden regime back off from the forced march toward EVs. The electric vehicles are stacking up on the dealer lots with zero customer demand, now reaching about 18 months of inventory on-site. This is becoming a financial crisis and it's going to be followed by plant closures and layoffs until car makers can retool for vehicles consumers want and at a price point that is affordable in the midst of 8%-10% car loan interest rates.

I don't think that affects Tesla directly, it probably indicates softening consumer demand overall, but we already knew that - it's the interest rates and spiking cost of living. I'm sure many people run out to take on a $1000 Tesla lease to save $200 / month in gas prices, but the smart money doesn't do that. Tesla vehicles have their own wheelhouse of customers who like the tech, and there really isn't an equivalent from other manufacturers, but I think those buyers would buy whether electric, gas, or hybrid. The difference is the Tesla software, which is years ahead of competitors in many regards. (Just ignore those quirky Tesla build/quality issues)."

註釋

TSLA tagged the mid-point of the conservative target zone today with a high around $252.75. But price has been unable to hold above $250 for long. Let's see what the close looks like.

This post had given only a slight edge to upside movement, and it provided conservative (reasonable probability) and aggressive (lower probability) target zones. The conservative zone was $250-$255, which is about where the downward trendline resistance (from the July 19, 2023, high) lies. The .618 Fibonacci retracement and anchored VWAP at $240-$244 had to be reclaimed first before even minor upside could realistically be expected—price ran into this level repeatedly and supply pushed it lower as evidenced by the long wicks into the $240-$244 area for several consecutive days. But the Nov. 28, 2023, update reported that this $240-$244 level was reclaimed on a daily close.

The post and updates have cautioned that the edge (probability) for more upside movement was only slight (from a technical perspective) given the conflicting technical data. This continues to be the case despite the conservative zone being reached intraday.

註釋

By refreshing the Primary Chart at the top of this post, one can see that TSLA's price has pushed slightly above the downward sloping trendline (and channel) from July 2023 highs. TSLA has also recovered the VWAP from the July 2023 highs.

The breakout above this channel (perhaps bull flag) has technically occurred. But the breakout has not been accompanied by particularly impressive volume.

TSLA also swooped below all the key VWAPs last week, taking out many long stops indeed. But it recovered each one last week, as evidenced by the long candle shadow extending below the VWAPs but rising above them as well for the close.

註釋

One further technical to monitor is a Fibonacci .618 level at $259.10. This approximately $260 level can be considered along with the highs from September 2023, and together they form the next resistance zone from $260-$278. If that can be reclaimed, then one can start to think about a retest of July highs at $300 could be coming. But considering a retest of $300-$315 resistance zone feels premature at this point while TSLA trades under July and September 2023 highs and trades under the $259.10 Fibonacci level. And US equity indices are extended to the upside and volatility is extended to the downside, so entering long here feels desperate, perhaps precarious, even if TSLA ultimately finds a way higher over the next 4 weeks.

Lastly, TSLA reports earnings near the end of January 2023. This date should be kept in mind by traders and investors alike.

註釋

TSLA continues to struggle at the $259 Fibonacci level discussed a couple of days ago in an update. This level = .618 Fibonacci retracement of the recent decline this year from July to October, though this level derives from the proportion on a linear / arithmetic scale (where as other Fibonacci levels shown in the original post are based on log scale).

註釋

Latest update on TSLA in new post from January 2, 2024:

註釋

GammaLabs explained today that CTAs and other price-agnostic funds had gotten max long equity markets, which implies that they may not be able to chase much higher.
This positioning data / information is helpful at times. While markets may be helped by seasonality for the next couple of weeks, the upside may be limited to SPX 4750 to SPX 4800 given positioning having been so stretched to the long side into YE 2023.

In any case, to get some updates on gamma and positioning, I believe GammaLabs free market newsletter (the Market Wrap provided after most trading sessions) can help. This account is one of my favorite follows. One can sign up for Gamma Labs' free evening email newsletter—often on positioning and major global news affecting financial markets. There are lots of interesting market updates even available in the free newsletter.

Again, if CTAs were max long at the start of this year (yesterday) and if SPX 4700 does not hold, then markets could be under pressure soon. This environment may make it harder to justify the upside case for TSLA beyond the very short term.

For now, 4700 SPX held firm on January 3 though it has looked weak last 3 days. Let's see how the week closes.

註釋

Here is an interesting chart to consider for TSLA bulls and bears alike: