Primary Chart: TSLA's Downtrend Shown by Parallel Channel, Anchored VWAP from Sept. 21, 2022, Key Support / Resistance Levels
SUMMARY:
TSLA remains within a broader downtrend that has intensified over the past few months. TSLA had held up better than many other tech names and high growth names in 1H 2022. TSLA's drawdown in the first half of the year was about -50% while many tech / high growth stocks declined -70% to -90%. For comparative examples, PLTR has fallen -86.22% from its all time high, SQ has fallen -82% from its all time high, BYND has fallen -95.1% from its all-time high, and UPST has fallen -96.45% from its all-time high. TSLA so far has fallen about -65.8% from its all-time high. For many of these high-growth and technology names, including TSLA, the selling doesn't look complete.
Just as corrective pullbacks occur in an uptrend, corrective bounces occur in downtrends. TSLA has reached the lower edge of its parallel channel and looks ripe for a countertrend rally. Add bullish year-end seasonality into the mix, and TSA may see chop at a minimum, or a modest rally. The term "modest" here means small relative to its sharp downtrend since mid-September 2022 and its all-time high of $414.50. In percentage terms, the corrective rally may be considered sharp from the perspective of any shorts that may have had the misfortune of entering their positions at the lower edge of the channel.
The Primary Chart shows the steepness of the downtrend since mid-September 2022, although the stock has been in a downward correction since its ATH in November 2021. The VWAP fro mid-September 2022 also shows the ferocity of the selling given how its slope falls rapidly over the past 3 months, hovering not far above the downtrend line. Bears have been pleased with this progress. But even bears must be cautious this year regardless of how weak the stock may be.
The conservative target is $155-$158. The aggressive target is $163-166. These levels are derived from both Fibonacci analysis and resistance levels from key price points shown on the Primary Chart.
Some additional charts supporting this thesis appear below:
Supplementary Chart A
Supplementary Chart B
Supplementary Chart C
Supplementary Chart D
For the longer-term perspective, please see the following post dated November 8, 2022:
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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.
SUMMARY:
- TLSA remains in a steep downtrend at the primary degree of trend.
- The selling is not likely to be complete on longer time frames.
- A countertrend bounce may take TSLA's price up to the following targets: $155-158 (conservative) to $163-$166 (aggressive). Countertrend bounces can fail at any time, so the odds of this working out well are perhaps lower than the odds of a downward move from key resistance levels that is aligned with the longer-term trend.
TSLA remains within a broader downtrend that has intensified over the past few months. TSLA had held up better than many other tech names and high growth names in 1H 2022. TSLA's drawdown in the first half of the year was about -50% while many tech / high growth stocks declined -70% to -90%. For comparative examples, PLTR has fallen -86.22% from its all time high, SQ has fallen -82% from its all time high, BYND has fallen -95.1% from its all-time high, and UPST has fallen -96.45% from its all-time high. TSLA so far has fallen about -65.8% from its all-time high. For many of these high-growth and technology names, including TSLA, the selling doesn't look complete.
Just as corrective pullbacks occur in an uptrend, corrective bounces occur in downtrends. TSLA has reached the lower edge of its parallel channel and looks ripe for a countertrend rally. Add bullish year-end seasonality into the mix, and TSA may see chop at a minimum, or a modest rally. The term "modest" here means small relative to its sharp downtrend since mid-September 2022 and its all-time high of $414.50. In percentage terms, the corrective rally may be considered sharp from the perspective of any shorts that may have had the misfortune of entering their positions at the lower edge of the channel.
The Primary Chart shows the steepness of the downtrend since mid-September 2022, although the stock has been in a downward correction since its ATH in November 2021. The VWAP fro mid-September 2022 also shows the ferocity of the selling given how its slope falls rapidly over the past 3 months, hovering not far above the downtrend line. Bears have been pleased with this progress. But even bears must be cautious this year regardless of how weak the stock may be.
The conservative target is $155-$158. The aggressive target is $163-166. These levels are derived from both Fibonacci analysis and resistance levels from key price points shown on the Primary Chart.
Some additional charts supporting this thesis appear below:
Supplementary Chart A
Supplementary Chart B
Supplementary Chart C
Supplementary Chart D
For the longer-term perspective, please see the following post dated November 8, 2022:
________________________________________
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.
Trade closed: stop reached:
Countertrend ideas are always lower probability as noted above. This one has been invalidated in all likelihood.
Comment:
It looks like this call was just a few weeks too early. Early bulls (even for a bounce / retracement) were annihilated. This is why trading with stops makes sense. The OS argument for a bounce looked strong, but OS by itself means little when momentum is exceedingly strong. Price broke the expected spots for a reversal, and fell another 20-30%. Then it's bounced even further than anyone expected.
It helps to wait for confirmation before trying to catch a reversal.
It helps to wait for confirmation before trying to catch a reversal.
SquishTrade
Related Ideas
The primary technical basis for the "bear bounce" idea was price having reached the lower boundary (support) of a steep parallel channel that had formed since August 2022, back when price was between about $267 and $310. The final weeks have seen intense selling, which suggested the potential for temporary relief. Steep trends / channels tend to exhaust more quickly than ones that are less steep. But in this case, this idea didn't work out. Price sliced through that parallel channel line and continued falling straight down on Thursday December 22. This was not a failed breakdown where price broke the channel and then recovered. Price closed well outside and below the channel.
Further, this bounce idea was not presented as a major trend reversal but as a possible short-term *countertrend* bounce. The post stated TSLA remained in a "steep downtrend" where the "selling is not likely to be complete regardless of whether a bounce occurs." The longer-term and broader view has been bearish for a while, as discussed in November 8 post that was linked above. SquishTrade published the bearish post on November 8 when TSLA was in the $190-$200 range. That view remains intact, and 3/4 downside targets have been reached for that separate post.
To be totally transparent, ST attempted to trade this bounce idea, but it ended up failing. This provided yet another lesson in humility after a few good calls this fall and winter. ST once again was reminded of the importance of tight stops when trading countertrend ideas. And in fact, it may be better to take countertrend ideas in only the rarest circumstances. TSLA's market has been telling us that supply of shares well exceeds demand, and that lower prices remain in effect as the trend. Fighting that is a risky bet indeed. Sure, it's fun to try sometimes, but without tight stops and risk management, it can lead to big losses.
Illness here has been an issue the past few weeks. But even without that issue, ST will make mistakes. But will try hard to continue to present helpful technical views for free (no signals or subscriptions at this time).