First off, I want you cognizant of the fact that Tesla (TSLA) is the only stock in our universe that I have consistently shorted. I am flat right now, but am aware of the possibility that I am capable of negative bias, and it could be inherent in my work regarding this name. I have profited most recently by being short, but that has not always been the case. Come to your own conclusions here.
For starters, we can see that the flow of money has been weak, not just since earnings, but for the better part of two months. Relative strength is now off oversold levels, and is likely to show short-term strength on Friday. You can also see the bullish signal sent by the 12-day exponential moving average (EMA) cross over of the 26-day EMA. While this is positive, they both remain severely negative in comparison to the nine-day. That could matter if the stock were to hit a wall of resistance at some point on Friday.
As to the larger models, you can see that a 38.2% retracement level worked as support back in July. The same level was recently tested coming off of the double top of September, and things became a bit sloppy. The name looks to break out of the medium-term Pitchfork model on Friday, and will likely pierce the upper trend line upon the opening bell. Should that line become support, there is a chance that this recent negative trend has been turned. That will allow for prices of 321 or even higher. However, if that trend line fails -- as I suspect it will, once the euphoria of last night's circus fades -- a 50% retracement down to $281 seems very realistic.
Those with a strong stomach might even reach for $260. I will not act on this name on Friday, and when I do, it will be through options, not equity. Too much human emotion involved here.
(This is an excerpt from Stephen "Sarge" Guilfoyle's Morning Recon, which now appears exclusively on Real Money, our premium site for active traders. Click here for a free 14-day trial and receive Morning Recon every day, along with exclusive columns from Jim Cramer, James "RevShark" DePorre, technical analyst Bruce Kamich and more.)
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