While the Teslaphobia of the last few weeks appears to have subsided, after Tesla Motors' (TSLA) - Get Tesla Inc Report stock price fell from to $205 from $270 in early April, the pattern doesn't appear complete for the decline to be considered over. History suggests what will come next is a final move below $205 that targets $195 +/-$3, which will conclude the first corrective structure of the larger consolidation after the impressive rally off the February low near $140. That near doubling in price in two months was so dynamic that a multimonth relief phase is required to return the technicals to at least a neutral status. Below is the warning we just informed members of our live-market Trading Room, and DSE Alerts services.
This is an intraday view of that rise, and the nearly completed first part of the consolidation. Once the green buy box is probed in the coming eight to 13 trading days, a larger bounce toward the pink sell box should follow. That targets the $235 +/-$8 zone. Once completed, that next rise should be followed by a break of the $195 level, and a likely test of the $170 +/-$5 area. If our historical pattern recognition algorithm is accurately forecasting the next couple months, perhaps into July 1 +/-two weeks, the best buying opportunity for Tesla shares since the February low will be at hand.
However, until more sideways to downward price behavior occurs, the upside should be limited, and surprises should occur to the downside. Therefore, if you are long and profitable, especially if you're using leverage, this $220 zone is an ideal area to lighten up. The weekly stochastics (not shown here) are newly crossed down, putting weight on prices for the near term. While the daily stochastics (also not shown here) are newly crossed up, easing selling pressure for the nearer term, the weekly stochastics have more power. So, until that larger degree of trend turns back up, $215 is a good sell stop to protect your holdings from a slide below $200.
The longer-term picture looks very bullish for this company's share price, but the conditions are not currently supporting new money commitments to the long side here. Patience along the lines of the analysis above will likely produce a much calmer and enjoyable path to future profits in this name.
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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.