TSLA
currently has two major confluences that I've been watching develop over the last few weeks. Firstly, coming off the 6 month high of mid July, Tesla has retraced to the Fibonacci 0.618.
Secondly, A classic triangle is now clear.
Triangles break out either to the top or the bottom. However, there are multiple confluences that are pushing me towards a (short term) Long position for a breakout:
#1: The Psychological. It's been very trendy to short Tesla as of late. According to CNN, short sellers lost 12.2b in liquidity shorting Tesla last year. I suspect retail and algos are looking for a buy opportunity.
#2: Long Term Technicals. There are only so many people on this planet that can afford high quality electric vehicles. But, the Model 3 and Model Y is now within reach of most consumers. However, electric vehicles are starting to show some previously unknown issues with a mass market. CBS News reports that Tesla owners can expect to find a 30% reduction in range in temperatures below freezing. For many Americans, this can be hard to swallow, especially for those commuting 50-60 miles a day for work.
#3: Adam Jonas. Adam Jonas cut his bullish price target from 380 to 345 this morning citing multiple factors including, "Global EV momentum is stalling. The market is oversupplied (and not enough) demand."
#4. Price Action. I'll go into this a bit more below with my expectations.
I see two scenarios playing out long term, but first lets set the baseline:
618 fibonacci is extremely stable, and it near perfectly lines up with the price action triangle. Tesla earnings are two days. I suspect we'll see intraday tomorrow as people anticipate the report but nothing drastic. Cybertruck has been delivering for the past few months and I expect we'll see a Christmas sales bump missed in the October report as prices continue to drop.
If the earnings report is positive (It most likely is) We will absolutely see a retracement to the 0.5. As there is (currently) little price action to support a resistance of the 0.5, it's possible that it could push past and there could be a retest towards late November through early December trade chop.
Anything beyond that would be ultra speculative, but two likely scenarios will play out after the move up:
First and what I believe to be most likely, We'll see another retracement to 618 and a bottom side triangle breakout. Fibonacci velocity resistance on the same high & low shows weak support.
Combine this negative sentiment towards luxury goods and vehicles in general (highest delinquency in 30 years) and we very well could setup for a false or full on breakout of this triangle.
Second and personally less likely, we setup for a mini bull flag as price action consolidates and breakout at the top.
Any way it swings will be interesting. I'll be keeping an eye on other confluences that appear as the retracement plays out to make a more accurate guestimate.
Cheers
-T
0.618 and the triangle structure offering strong support, but if the investor call is as negative as anticipated, we very well could see a runaway and a failure of the triangle.
HEDGE YOUR BETS. SET YOUR STOP LOSSES. Enjoy the ride!