Many have been astounded by the recent run in Tesla shares, but the technicals may have given you a clue earlier. 

While it may have been tough staying on board through all of the volatility, the charts would have kept you in the game if you kept the faith.  I wrote about it recently in some blogs and even mentioned a strategy for playing it on earnings with Scott Redler of T3Live.  This turned out to be the right call (buying a strangle in front of earnings). 

The speed of this move has been breathtaking, gobbling up points to the upside, helped by dreamy price targets and confident analysts.

Bears have been fried lately trying to short Tesla, one well-known hedge fund manager (who was written about here last week) has been scorched with his repeated short calls on the stock, and I suspect if anyone followed the advice they may be regretting it.  He may be right, eventually – stocks don’t grow to the sky, but how long can you be wrong?  Keynes once said, ‘markets can remain irrational longer than you can remain solvent’.   But let’s take a look at the charts and see where things might seem different.

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I look at several technical indicators on the chart but a leading indicator is relative strength.  The ones that perform the BEST under the worst market conditions generally see the best moves when the markets recover.  In this case, the RS for Tesla made higher highs, higher lows (top pane) and gave us clues that at some point it would really have a strong move.  Exactly this one?  No, but you once the resistance was breached you certainly would have wanted to hang on – and NOT be short the name!

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Bob Lang has been managing private options trading accounts for clients since 2004 and providing subscribers with guidance on trading options for income at Explosive Options since 2011.

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