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Related Articles
06.17.14 “My $TSLA Calls”
10.09.14 “$TSLA Warning Signal [Part 1]“
10.27.14 “$TSLA Warning Signal [Part 2]”
12.03.14 “[VIDEO] Mid-Week Update with Kay Kim”
12.07.14 “$TSLA Warning Signal [Part 3]”
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Weekly Bearish Divergence
*Above chart (screened on 10/9/14) featured on the article 10/9/14
*Above chart screened today
Since we’ve formed this weekly-bearish divergence back in early October, it has gotten worse making things very difficult for the buyers. As I have been emphatically advocating, these weekly-signals can be very potent (I’m talking about primary term sentiment change–we are no longer in an uptrend), and because they are a weekly-signal, many traders/investors fail to recognize the big picture, thus not understanding why Tesla has been struggling so much. When the emotions are high, I would completely forget the fundamentals and pay attention to the technicals. The problem continues to ramp up for Tesla in techncials as we have many warning signals mounting up.
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Monthly Bearish Divergence
[Chart screened on 12/13/14]
To make things worse, we have bearish divergence starting to confirm in the monthly-term as well. This is probably the worst signal you would want to see if you are a Tesla fan-boy. This signal alone isn’t a huge deal, but when it forms along with weekly-term divergence; let’s just say we are now fueling to the fire that has already begun. Again this is a major warning signal, and I wouldn’t ignore them.
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Daily H&S Confirmed
This massive H&S is now confirmed when it broke below the neckline, but I do think we may get a run-up within the few weeks to retest that neckline area. This is where things could REALLY heat up if the neckline becomes a resistance. Also we have to keep in mind that because this is such a massive scale of H&S, we have to make sure we also take a look at the weekly chart neckline pivot as well. But the daily chart H&S neckline is at around $230ish. We get rejected there, sell-off will be intensified.
Weekly H&S Confirmed
So looking at the weekly chart, H&S neckline is at $240 while the daily H&S neckline is at $230 so I would watch both levels as a potential resistance. If or when the neckline of $230-$240 gets rejected and price falls, I think things are going to get so much worse and bears are going really tear things-up. Yes, I’ve seen these H&S never play-out but when you already have weekly and monthly bearish divergence on top of the H&S confirmations, it has high probability of playing out. again, we are no longer in an uptrend. Take caution.
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Let’s Recap
- Weekly bearish divergence
- Monthly bearish divergence
- Daily H&S confirmation
- Weekly H&S confirmation
- Primary-term uptrend supports have been broken and compromised
- We are trading below all major moving averages including 100 & 200SMA
- I do think short-term (1-2 weeks) pop might be seen to retest the neckline ($230-$240)
- If the neckline rejects the price and it falls, true sell-off will begin
- *This is a major warning signals–take heed
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Final Thoughts
I think the problem for Tesla is that we have multiple major-warning signals mounting up on top of each other. This sentiment kind or reminds me of when Apple ($AAPL) fell in late 2012. I am not sure if we are going to have complete crash, but I think these signals are insinuating that Tesla could have 50% correctional move (from its peak which was at $290ish so $150-$160 might be where its headed) if that H&S neckline rejects the price. Unless you are trading short-term, I wouldn’t try to call bottom because it’s going to take a while before the bulls can nullify all these signals we’ve discussed on this post. ‘V’ shape reversal? Probably not. Again, remember, we are not in an primary uptrend anymore so the ‘V’ shape reversal is out of the equation. Look for higher-lows and higher-highs in the primary term before entertaining the notion that it has bottomed. It could take months before the bulls can nullify the pressure of H&S formation, so it’s going to be tough for the Tesla investors for the next 3-5 months.
K, looks like it’s drifting to $200. We could be getting that bounce there. Gonna keep and eye on it. I noticed that the previous strong support at 200 sma is now starting to curve downward. Maybe it will meet around 215-220 if it bounces back up? so then the h&s neckline could meet up with the 200 sma. Boy if that doesn’t sound like a ceiling, I don’t know what does. Also we are approaching earnings in Jan so it could hit the ceiling by then. Thanks for all your insight K. Have a Happy Holiday! Thanks for the Twitter tweets too.
Zex_M19 yea 200SMA could act as resistance now as it acted as support back in November. Thank you and you as well have a happy holiday!
@2kaykim @Zex_M19 Looks like shorts wanna take profits here. Maybe some buyers come in too. 195-200 holding. Looks like a technical bounce back to 200sma
Zex_M19 yea if we close with strong bullish candle today, i think $220-$230ish neckline retest is coming. ill cover more tonight at my mid-week update video
K, which is a stronger ceiling? the neckline or the 200 ma?
I’m looking to buy puts but can’t figure which one to go in on.
The neckline looks around 220-225 while the 200ma is at 230
2kaykim Zex_M19 K, it’s following the techicals very well. Looks like we could see the big fall happening soon, it’s got a dead cat bounce to 220 quickly. it can’t be sustainable. It also did it on no major news (fundamentals) to give it a reason to turn around. so it tells me that it’s just shorts taking profits before the holidays. once they are done talking profits, we should see the real bear start hitting this. Looks to me like if it goes back down and confirms H&S then we could see the next floor at 180 maybe? not sure. Hope you can confirm this point if we start to go down.
Zex_M19 currently 200SMA and 50EMA is coinciding so I Think $230ish is going to be strong resistance. But as I have shared weekly chart on this post, $240 is also possible with overall market being bullish. but to me it looks like $230 can be achieved this week.. Also 50% Fib is $230ish.
TSLA looking terrible today.
I think this might be it.
No harm in starting a put position here and add to it if it goes up to 230 for me.
Potential for this to go up 10 but end up down 40 or more.
I’m in.
I figure if I buy far enough out, I will be safe. And very very small amount. just to get feet wet.
Eh. I think I am a week too early. There is news on the roadster coming out next week that will probably prop this up until then. Reminds me of the Model D announcement. After it came out, the stock dropped early Oct. Same reason. Same looking chart too. Anticipating drop in the new year unless technicals nullify.
Zex_M19 well, what you need is a catalyst candle or move before shorting. Need at least some signals that this thing is reversing. Currently, its still moving higher as far as technicals are concerned. As of today we don’t have any bearish sentiment in the miner term as we are still above 10EMA. I would look for either bearish engulfing pattern and/or shooting star candle and then look for a follow through next day before shorting… hope this helps
2kaykim Zex_M19 Thanks K. Yeah i was thinking a shooting star that hits 230 would happen. I jumped the gun but not worried. I will add if I see bearish reversal sign. Learning to be patient. It’s hard. Maybe slow drift to 230 until next week’s announcement. Will sit back and watch the price action.
Hmmm.. 224 this is the 3rd time this week its hit that and hasn’t broken. Could be bottom of the H & S neckline keeping it down. Even with news to move this up, it can’t get it done. Looks like we have to see how it performs into the new year to get some answers. If it shows weakness before then, we could see fresh selloff when traders come back in 2015.
224 broken. On its way to 230
Zex_M19 yea looks like $230-$240 neckline retest coming
K,
tsla looking weak again. After getting very close to 230, it’s drifting down.
If it continues to do so then I think that’s it. It needs to get above 230-240 next few days/weeks to reverse the H&S. Unless I see that I will see this as a continuation of the H&S headed below 180. I think next few days will be critical. New year coming so sellers/buyers will be back in volume. Could get ugly for tsla if they continue the drop in Jan. This Fri and next week will be interesting.
Hard to tell with such low volume due to holidays. I think things (direction) will be clearer soon in Jan.
Real selling beginning. Still holding my puts.
Zex_M19 looks like $230 neckline-rejection. with 200SMA and 50EMA declining on the daily term, looks like the selling could continue.
K, looks like th move down on earnings is helping to either form a lower low or a reverse H&S.
hard to tell. Yeah, I am feeling like the sellers are getting tired. We have the Model X coming out this summer. If they can turn around their problems in China and Musk said he has a few surprises coming soon, this could cause a short squeeze. We could see TSLA trading in a range until next earnings.
Zex_M19 yea stil wouldn’t short this.. Above $230 it will get me to watch closely to go long again..
K, Massive bear flag still in play! Looking very scary. Lower highs. We are getting close to the tip. Maybe within the next week or two. Could see the 170s if it does not hold.
Zex_M19 thats exactly what downtrend does… still very much ugly to me. bearish dark cloud cover candle today.