TSLA. Don't exit your longs just yet!TSLA has reached the target we set last week, but that's not all. There are many factors that suggest we should not exit our longs, at least not completely. But before I list those factors, let me first clarify that I'm talking about leveraged longs, not stock. If you own shares in Tesla, then I would not advise selling them, even if the stock price went down 50%. I'm talking about your trading position, not your long-term investment.
Positive Indicators:
Price gapping up for the past two days is a strong signal for bullish momentum.
The shape of the last candle is bullish.
The candle body is fully above the major resistance trend line in black.
RSI still has more room to go up before it hits record high.
Despite negative indicators which I will list below, TSLA is one of the safest stocks to hold when the whole market is red.
Even though the entire market was struggling in the past two days, TSLA was going up very strongly, which suggests that if the market was doing well in general, we would've seen even more gains. This is a sign of strength and real demand.
Negative Indicators:
TD Sequential on the daily shows that the last candle is a green 9, which is a sign of reversal. The way to trade it is you take profit, and wait until you can identify the direction of the next momentum. However, historically, TSLA has not responded well to such reversal signals.
On the weekly, TD Sequential shows the last candle as a green 8, which means there is one more week to the bullish momentum to go before it is exhausted. The problem is we can't tell whether the 9 candle will be green or red. Combined with the daily signal, the way it could play out is that we get a red weekly candle that completes the 9 count.
We see general weakness in TVC:SPX and signs of the start of a bullish momentum in TVC:DXY . Now when DXY is going up, it means that the dollar is becoming more valuable, so people start cashing out of their positions, which affects the stock market negatively. However, like I said earlier, TSLA has proven to be one of the safest stocks to hold when fearing a market drop or correction.
The last candle stopped at exactly the crossing of two Fib lines that I drew a long time ago. One is horizontal, and the other is descending. So I feel like there are too many resistance points there.
The Trade:
In my chart, I have a big black thick broadening wedge.
I have a small ascending parallel channel that starts from Nov 2020 and has already been broken upwards.
I have a descending Fibonacci retracement just above the last candle. This line has not been tested so we cannot be confident that it will resist the price. I'm assuming that it will resist it, together with the broadening wedge.
I also assume that the top of the parallel channel can hold the price if it drops.
I'm also assuming that the bottom will come after four daily candles. That is the typical correction time expected after a TD sell setup completes on a 9 candle. The correction could finish sooner of course.
I picked my stop loss to be the bottom of the last full green candle. That is at $722.90, which also crosses the top of the parallel channel.
A lower stop loss is at the bottom of the parallel channel and is below all the gaps. If gap-filling OCD is your thing.
My target is the next descending Fib line, so it is around $1050.
I've drawn two paths that are conservative, in my opinion, on where price might be heading based on my trend lines.
Notice the similarity of this candle to Friday 10 July 2020. It was also a green 9. RSI was at a similar level. It was followed by a red candle, some sideways movement for a month, which calmed down the RSI, and then of course a new bullish momentum followed.
The conclusion is that even though a small pullback is expected, it will be very hard to trade, very hard to call the bottom of the swing, and it's a much better option to hold your longs, or simply move your stop loss higher; because after all, TSLA might just do what it's been doing for the past year, ignore all the reversal signals and gap up!
