As shares of Tesla (TSLA) - Get Report were testing 220 in the third week of May, our decision support engine (DSE) flashed a warning, reported in these pages, that the time to exit long exposure, especially if leveraged, was at hand, as sub-200 was in the cards imminently. What has happened in the past month fulfilled that forecast, and a new warning has just been issued by our DSE to members of our alerts service.
This is the daily bar chart of Tesla, the bigger picture perspective of the chart posted in our May analysis, which shows that the risk of decline is now minimal, while the upside reward is substantial. This is due to many of the DSE's component indicators, the first of which is the stochastics extreme, now at oversold levels under the 10% threshold. Not shown, the longer-term weekly degree of trend is also at the same oversold extreme.
In addition, the rise into the April peak took on impulsive characteristics, which are typically followed by three wave corrections. That can now be ruled as complete, as the green oval within the green buy box has just been achieved. As readers of our work might remember, DSE warns to be selling into the pink boxes, and buying into the green ones. Viola: Green it is!
Price has also fallen to test the lower Bollinger Band (purple dashed line), after reaching the overbought extreme at the upper BB in April. And, is now within 10% of testing the lower 2 standard deviation band (olive/gold line), which controls 95% of normality. So, the odds, and the math of statistics and probability-ranking, are now strongly favoring using buying actions to exit shorts, and begin establishing long exposure to Tesla in this 190 +/-10 zone, as the path should soon ignite a rally to well above the April highs, in the coming year. The bottom line: selling actions are no longer indicated, as they were into the May 20 DSE warning.
These are the kinds of analyses we will be focusing on in our July workshop in Los Angeles, where there are still a few seats available. If you would like to reserve your spot, contact information is available at that link.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.