Another Stock Idea. I have been going through a list of liquid and optionable stocks & etfs to find stocks to possibly trade options with. For those of you who follow me, my first time I ever traded with REAL money was with options. Did great for a team, but had no trading plan and no risk+money management. Goes back to the saying "Fail to Plan and you Plan to Fail!" Now that I am "paper trading" and redesigning my trading style and formulating/tweaking my plan, I have decided to pay an old visit to options and test to see how options would work with structural + harmonics trading.
Here is the roadmap of the trade idea. I noticed that (if you look on the daily chart or further back on the 1 hr chart) that Tesla has been making lower lows and lower highs since September 2013 such that it has respected a trendline resistance (pink dashed line). On the 1hr timeframe, I also noticed that the current share price is at a structural level (red dashed line) as well as being overbought on the Stochastics. Furthermore, Tesla is currently at the intersection of both the resistance/support level (red dashed line) and the trendline resistance (pink dashed line), which, to me, makes a highly probable reversal area.
Now for targets, I typically go for the 0.382 and 0.618 retracements (as long as structure matches). In this case, the 0.382 matches the beginning of the gap seen on February 11 with the Earnings announcement, which also matches structure (blue dashed line). Great! This could then be a possible area to take first profits. If there is a continuation, then I would look not at the 0.618 but at the 0.786 which matches support (hit at least twice).
Now, I also found a Bullish Butterfly Pattern that could possibly complete if Tesla continues in a Bearish direction to completion at 174.64. The PRZ (purple rectangular box) includes the 1.618 BC and 1.618 AB extensions. I am usually skeptical of Butterfly patterns because it would mean a break in structure. But because Tesla has been in a Bearish trend since September, then this could be a possibility to (1) follow the downtrend that I initially highlighted and (2) go Long for a quick profit at pattern completion.
Trade wisely, Trade responsibly.
Comments/Suggestions are always welcomed.
Here is the roadmap of the trade idea. I noticed that (if you look on the daily chart or further back on the 1 hr chart) that Tesla has been making lower lows and lower highs since September 2013 such that it has respected a trendline resistance (pink dashed line). On the 1hr timeframe, I also noticed that the current share price is at a structural level (red dashed line) as well as being overbought on the Stochastics. Furthermore, Tesla is currently at the intersection of both the resistance/support level (red dashed line) and the trendline resistance (pink dashed line), which, to me, makes a highly probable reversal area.
Now for targets, I typically go for the 0.382 and 0.618 retracements (as long as structure matches). In this case, the 0.382 matches the beginning of the gap seen on February 11 with the Earnings announcement, which also matches structure (blue dashed line). Great! This could then be a possible area to take first profits. If there is a continuation, then I would look not at the 0.618 but at the 0.786 which matches support (hit at least twice).
Now, I also found a Bullish Butterfly Pattern that could possibly complete if Tesla continues in a Bearish direction to completion at 174.64. The PRZ (purple rectangular box) includes the 1.618 BC and 1.618 AB extensions. I am usually skeptical of Butterfly patterns because it would mean a break in structure. But because Tesla has been in a Bearish trend since September, then this could be a possibility to (1) follow the downtrend that I initially highlighted and (2) go Long for a quick profit at pattern completion.
Trade wisely, Trade responsibly.
Comments/Suggestions are always welcomed.