Pascal
04-27-2014, 09:01 AM
TSLA has been a leader in the past year. It has now pulled back and the EV pattern shows accumulation. Does it mean that we should buy it here?
If we look at the long-term picture, it is clear that TSLA is pulling back into the lower part of its trend line and is close to the $200 support level. Also, it is a great company with much potential. Hence, the underlying story is incredible, which justifies the incredible valuation.
23651
When you study the shorter time frame, then you can see that we have been in a downtrend for the past 40 days.
23650
The EV pattern looks positive, but it has been negative last week.
23653
The Supply Figure shows that with a 13 days turnover, any momentum will quickly gain traction. Since we are now above 10%, on the left part of the Neutral Boundary, current shareholders will have a tendency to cut losses. The deeper the pull-back, the stronger the selling.
23652
If you would like to buy here, it would be better to buy close to the Lower Boundary (around $182.)
If you look at the past 40 trading days, the probability to reach that buy level on Monday is 0%, simply because the intraday average volatility for the past 40 days does not let you to expect to reach that buy target.
Also, a natural stop would be below the 200MA. This is a level that could not be reached.
In fact, there is no possibility for a short-term trade here.
23649
What about a long-term trade? In a long-term trade, you believe in the story, the valuation and the LT trend. Because you believe in these, you also need to "give some room" to the stock. Indeed, you cannot expect the stock to bounce and make a new high if you do not allow for a stop that is much higher than 5%. Maybe 7% or even 10% stop.
If we look at the stats for the past 300 days, using a 20 days time-frame for our investment horizon, then we can see that a buy price at $182 requires a stop that is much lower than the 200MA. In fact, a stop at $170 would be reached with a 89% probability if we plan to keep the trade for 20days.
23648
The next stats table below shows that we would need to lower the stop level to $155 to keep the probability close to 60%. However, a $155 stop level means at stop of 15%, which means that the position size must be small. In other words, the LT view is also very difficult to trade, because TSLA experienced two rather deep pull-backs in the past Months.
23647
There are still two other aspects to consider:
1. TSLA's earnings are on May 8. This is not that far away. If you want to hold for at least 20 days, then you'll need to hold through earnings. Any small miss will have poor consequences for the stock price.
2. Although the story is great, the market has started to simply reject stories. Look at the AMZN, P, AWAY, FEY stories before and after earnings.
My conclusion is that if you want to buy TSLA for the long-term, better first focus on the ST and try to hold one day at a time. In the short-term, you would wait for a pull-back to $182 and then see if money comes in. I would certainly wait to have earnings behind me.
If we look at the long-term picture, it is clear that TSLA is pulling back into the lower part of its trend line and is close to the $200 support level. Also, it is a great company with much potential. Hence, the underlying story is incredible, which justifies the incredible valuation.
23651
When you study the shorter time frame, then you can see that we have been in a downtrend for the past 40 days.
23650
The EV pattern looks positive, but it has been negative last week.
23653
The Supply Figure shows that with a 13 days turnover, any momentum will quickly gain traction. Since we are now above 10%, on the left part of the Neutral Boundary, current shareholders will have a tendency to cut losses. The deeper the pull-back, the stronger the selling.
23652
If you would like to buy here, it would be better to buy close to the Lower Boundary (around $182.)
If you look at the past 40 trading days, the probability to reach that buy level on Monday is 0%, simply because the intraday average volatility for the past 40 days does not let you to expect to reach that buy target.
Also, a natural stop would be below the 200MA. This is a level that could not be reached.
In fact, there is no possibility for a short-term trade here.
23649
What about a long-term trade? In a long-term trade, you believe in the story, the valuation and the LT trend. Because you believe in these, you also need to "give some room" to the stock. Indeed, you cannot expect the stock to bounce and make a new high if you do not allow for a stop that is much higher than 5%. Maybe 7% or even 10% stop.
If we look at the stats for the past 300 days, using a 20 days time-frame for our investment horizon, then we can see that a buy price at $182 requires a stop that is much lower than the 200MA. In fact, a stop at $170 would be reached with a 89% probability if we plan to keep the trade for 20days.
23648
The next stats table below shows that we would need to lower the stop level to $155 to keep the probability close to 60%. However, a $155 stop level means at stop of 15%, which means that the position size must be small. In other words, the LT view is also very difficult to trade, because TSLA experienced two rather deep pull-backs in the past Months.
23647
There are still two other aspects to consider:
1. TSLA's earnings are on May 8. This is not that far away. If you want to hold for at least 20 days, then you'll need to hold through earnings. Any small miss will have poor consequences for the stock price.
2. Although the story is great, the market has started to simply reject stories. Look at the AMZN, P, AWAY, FEY stories before and after earnings.
My conclusion is that if you want to buy TSLA for the long-term, better first focus on the ST and try to hold one day at a time. In the short-term, you would wait for a pull-back to $182 and then see if money comes in. I would certainly wait to have earnings behind me.