For the last two years, shares of Tesla Inc. (TSLA) traded above $360 per share several times with the high of $389.61 set on Sept. 18, 2017. The low end of the trading range has been just below $250 per share with the lowest low of $244.59 set on April 2, 2018. This range can be traded as my proprietary analytics shows a weekly value level at $248.96 and semiannual and annual risky levels at $358.87 and $388.02, respectively.
Tesla closed Friday at $275.43 -- down from Thursday's close at $289.96, which was already down 12.9% so far in 2019. But it was up from the carmaker's low of $270.10 on March 5. The stock is in bear market territory, down 25.2% since setting its 2018 high of $387.46 on Aug. 7.
There seems to be at least one new Tesla story a day and today it's the announcement of the Tesla Model Y, a crossover SUV with a starting price of $39,000. The stock traded lower this morning as buyers were looking at a starting price of $35,000. In addition, the vehicle will not be available until 2020, and given delays, Tesla will likely need to raise funding.
I met a Tesla owner a couple of months ago and I know that owners of the Model S love their driving experience. This gentleman not only loves his Tesla, but he also lives off the grid. His home has solar panels and he never has to pay for electricity.
Sometimes reactions to earnings reports drive Tesla shares higher or lower. The low of $247.77 on Oct. 10 was followed by an earnings beat on Oct. 14 accelerating the stock to a high of $379.49. This captured the volatility between the trading range extremes.
The Daily Chart for Tesla
Courtesy of Refinitiv XENITH
The daily chart shows the volatility for Tesla since March 2017. Obviously predicting these ups and downs is next to impossible and shows that the stock should not be a long-term investment at current levels. When you observe patterns such as this, it's best to react to the volatility. The close of $332.80 on Dec. 31 was my input to my proprietary analytics. This resulted in semiannual, annual and quarterly risky levels at $358.87, $388.92 and $415.60, respectively. The close of $319.98 on Feb. 28 was input into my analytics and resulted in my monthly pivot at $286.37, which has been a magnet so far in March. My weekly value level is $248.96.
The Weekly Chart for Tesla
Courtesy of Refinitiv XENITH
The weekly chart for Tesla is negative but oversold with the stock below its five-week modified moving average of $298.15. The stock is just above its 200-week simple moving average or "reversion to the mean" at $274.86. The 12x3x3 weekly slow stochastic reading is projected to decline to 19.80 this week, falling below the oversold threshold of 20.00. Note how the stock tested and held its "reversion to the mean" in February 2016, November 2016, March 2018, September 2018 and now.
If Monday's open is a price gap below the 200-week SMA, waves of selling could break the trading range to the downside.
Trading Strategy: Buy weakness to its weekly value level at $248.96 and reduce holdings at its semiannual and annual risky levels at $358.87 and $388.03, respectively. Aggressive traders can buy at the 200-week SMA at $274.86 and book profits at my monthly pivot at $286.37.
How to use my value levels and risky level:
My value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on December 31. The original quarterly, semiannual and annual levels remain in play. The weekly level is changed each week; the monthly level was changed at the end of January and February. My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.
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