After falling 31.4% year to date and 33.1% from its record close on November 4, 2021, is Tesla (NASDAQ: ) a bargain?
Tesla really has a lot going for it. The company has shown resilience in the face of challenges during and is capable of recording a second half as it remains a leader in its space. Additionally, Senior Analyst & Founder of Star Research, Ray Wang argue that Tesla and others should replace Meta Platforms (NASDAQ: ) and Netflix (NASDAQ: ) in the big tech leadership.
But based on my interpretation of the forces of supply and demand, now is not the time to buy Tesla, and it might be a good idea to short the stock.
In August, I revealed a contrarian trend in stock prices and predicted that the short-term trend would continue before the long-term decline resumed. I was wrong. The promotion flag has been flown. The forecast indicator ran out of volume support on the breakout of the flag, so a potential trade setup error changed.
The stock completed a small double top, strengthened by the daily moving average (DMA) of 200. After a penetration of about 5% for 3 days, the coverage of the claims of a short position caused a reversal that confirmed the resistance of the neckline.
Note: I would prefer more volume on the breakout, and the 50 and 100 DMAs have been supporting the price action for three periods. Based on its high of $34.25, the benchmark is $245.10
Tesla has been volatile since December 2020. A break below its levels will complete a large high in H&S, implying a $200 cut. On the contrary, the upper division of the downward trend since then may suggest a continuation of the upward trend. It is important to note that the frequency is assumed to disrupt the upward trend as long as there is no downside correlation.
Tesla Marketing Strategies
- Conservative businessmen should wait for investors to resolve the long-term trend.
- Average Traders would wait for the price to drop below the 50 and 100 DMA before considering a short sale.
- Aggressive traders may sell short at will.
Tesla Trading Example – Aggressive Short Selling
- Admission: $280
- Stop-Loss: $285
- Risk: $5
- Goal: $250
- Prize: $30
- Risk reward ratio: 1:6