Tesla (TSLA) just reported earnings. All around it did “ok.” It failed some expectations, met some expectations and surpassed a few. Overall, the stock did have a nice sell off.
I love how a lot of writers will use the word “tank” if a stock drops more than 5% or so. The articles will commonly say “this stock has tanked”… or “this stock is tanking.” I like the word, but truly, TSLA just fell to a pretty solid and obvious support. A key pivotal area, if you ask me.
TOPPING PATTERN
Let’s look at the technical aspects of this stock for a tad. There is definitely a topping pattern of some kind. TSLA had three lower highs, represented by the red line. Therefore, with three touches, that’s now a confirmed trend. On Wednesday, we did make a relatively lower low. The stock traded right to the 150 level and the 100 simple moving average, both of which are supports.
TSLA also has a solid bullish trendline, interacting with the low of the 11/6/2013 daily candlestick bar. Therefore, with 3 levels and areas of support, I expect TSLA to “chill out here” for a bit. On Thursday I expect TSLA to have an inside day. That means, the open, high, low and close of the 11/7 candle will be entirely within the open, high, low and close of the 11/6 candle. From there, my expectations are, this stock continues to trade above the bullish trend-line and below the red downward trend-line, forming, in essence, a triangle. Some form of symmetrical pattern, or perhaps a descending one.
KEY LEVELS
I have two triggers at this point. With a close above $182.58 and I would become a matador for this bull. A close below the 11/6/13 candle wick, $143.81, and I would likely climb a high tree in order to hide from the bear that would likely follow.
A few of my students do own shares of TSLA. During this potential sideways move, $180 covered calls, for Nov or Dec, would bring in some premium as TSLA likely consolidates a tad. If this stock does not consolidate, and the gap from earnings does not fill, I would consider it a breakaway gap, which would add weight to the bearish trigger.
SELLING WEEKLY PUTS
From here though, I think it’s a waiting game, probably a week or two at minimum. How do I know, or how could I even speculate on that? I guess it’s just experience really. I’m also confident a few of my students will likely be selling weekly puts below the 100 and below that 150 support line. That is a strategy to take advantage of a particular sideways move, and a strategy only done if the student wants to own shares of TSLA.
It’s a good stock and company overall, I feel. This stock does not pay dividends and likely won’t for a while, would be my guess. I’ve never driven a TLSA yet. I’ve seen a few and they are snazzy looking vehicles. Here’s the fact; a stock is best bought as it bounces off support. TSLA is at a strong support now and it’s been in a bullish trend. I personally would not trade it bullish until we get confirmation of a trend reversal, which truly could happen if we close below $143.81. This could be a fun move!
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