The weekly chart for Tesla is coming to an interesting point from a technical perspective and as always there are several key volume price analysis lessons as we look both back at the year and forward to the next.
First, let’s start with a look back to the second week of 2021 with the wide spread up candle which took the stock price from $719 t0 $880 per share. An explosive move but look at the volume associated with the extreme price action. It is high certainly, but compare it to the previous up candles in both November and December of which we have three and consider the volume. The spread of each is half that of the extreme candle, yet the volumes are much the same or higher. What does this tell us? Simply that the extreme move of early January is a very clear anomaly of effort and result and Wyckoff’s third law, and therefore is likely to be a trap move as the market makers are not participating and drawing in traders and investors on the fear of missing out or FOMO. No surprise therefore when the price reverses.
Moving forward to the current price action of the last few weeks, once again we are starting to see warning signals appearing. First, we are approaching the old top of January. Second, notice how the volume, in general, has been declining consistently throughout the year, and more particularly last week where we have a wide spread up candle on low volume. Compare last week’s price spread with that of the candles I outlined above in December 2020. Yes, the price spread is a little less than these, but not great, yet look at the volume which is less than half and perhaps even a third and less than 100 million on the week. So, like the ES Emini, warning flags are flying in an increasingly strong headwind.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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