When it comes to fervent advocates and supporters of a stock, there are none more passionate than those who follow Tesla, so I thought it would be interesting to consider multiple timeframes for this iconic company starting with the daily, then moving to the weekly and on to the monthly. So let’s get started and of course, this is ahead of the FOMC later today.
As I have explained in previous analysis for Tesla, there have been several clear volume price analysis signals over the last couple of months on the daily chart, not least the rally into the $1243 per share high of late October and early November which was on falling volume and was subsequently followed by the extreme down candle associated with volume signaling a reversal or congestion, the latter being the result with the stock moving sideways around the volume point of control at $1050. Since then we have seen bearish sentiment develop once again in early December and note the three candle rally on falling volume, with the weakness of the last few days then confirmed with the price closing yesterday at $958 per share. So what’s ahead on the daily chart? First, as I have highlighted before, we have a low volume node immediately ahead on the VPOC histogram which extends to $900 per share, with a further region between $850 and $800 per share. These are significant particularly when considered with the potential for price-based support of which there is none on the accumulation and distribution indicator until we hit the $750 per share level and denoted with the red dashed line. In short, in terms of either volume or price-based support, there is little to offer any platforms of significance between the current price and $750 per share.
When we move to the weekly chart, here too there have been plenty of volume price analysis signals providing us with a longer term perspective, and on this chart, it is the vpa concept of benchmarking which takes center stage. Consider the two candles of the last week in October and the first week in November. First, we have a wide spread up candle with volatility but look at the volume when compared to others over to the left of the chart. October’s candle is hardly representative of such a genuinely strong move and even more so as this was a gapped-up open. So two reasons to be cautious and suspicious of this move. This is followed by another gapped-up move and really confirms the suspicious volume of the previous candle as this has taken almost as much effort, with marginally less volume, so anomalous. In addition, volume is falling in an up move which in itself is worrying. Finally, the weakness is confirmed with the first candle in December as the price attempts to rally but falls back to close well off the highs of the session. And one other point before we move to the monthly chart. Note how the interest in this stock has waned in the period from September 2020 through to the current – a dramatic decline and therefore easy for the market makers to develop the trap move of October on thin volumes, drawing in many thinking this was set to rocket higher.
And so to the monthly chart which screams a warning louder than any other! The October candle is extreme in terms of price action, even by Tesla standards, but look at the volume it is only marginally higher than the previous month which generated a narrow spread candle. If there was ever an anomaly this is it and which prompted my analysis that the stock was set for a correction, which drew intense criticism at the time. This was followed by the mother and father of a long-legged Doji signaling indecision with this month’s weakness developing as we approach the year-end. The meteoric rise of this stock resembles one of Elon Musks launches, and with a low volume node ahead here and relatively light volume on the VPOC histogram down to $750 per share, it seems likely there is a further weakness to come before we arrive at a possible pause point and congestion, perhaps around $800. Longer term, of course, Tesla is perfectly placed for the mainstream transition to EV’s.
Finally, as I mentioned above today we have the FOMC with the market waiting on bated breath as to the FED’s intentions concerning both tapering and interest rates. Much has been written about what the FED may or may not do and what it should do given the current inflation data. However, the key here is the FED and other Central Banks are powerless against the present surge in Covid numbers and the failure of all countries to deal effectively with this pandemic which may simply dictate the next step. A further scenario is the FED is just as clueless as everyone else on the best way forward so we may simply end up with mixed messages.
By Anna Coulling
Charts from NinjaTrader
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