A Measured Move Pattern on Tesla Suggests Caution Ahead

 | May 31, 2017 | 1:49 PM EDT
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It is not often that we notice a "measured move pattern." What is worse is that by the time you recognize this relatively rare pattern it is probably 80% over -- not all that useful. Looking over some of the popular names today I noticed what I consider a measured move in the share price of Tesla (TSLA) .

Keep an open mind and join me in looking at the charts and indicators on TSLA.

In this daily bar chart of TSLA, below, I can see a measured move or an A/B move as it is sometimes called. Let me explain - TSLA makes a rally from $180 to $285, a gain of $105, from December to February. In March TSLA starts another rally from near $240 to short of $345 now. Again $105. The measurement of the first rally for $105 is repeated on the second rally. They travel the same distance, or the first leg is called "A" and it is matched in length by the second leg called "B". For the most part the price action is bullish. TSLA is above the rising 50-day moving average line and the rising 200-day moving average line. The On-Balance-Volume (OBV) line has moved higher since early December supporting this advance. In the bottom panel is the momentum study which shows slowing momentum from April to May. A slowing in the rate of acceleration is like an amber traffic light -- we need to pay attention but we may not have to act on it.

In this weekly chart of TSLA, below, we can see that prices are above the rising 40-week moving average line. The weekly OBV line has moved up from its November low but the OBV line has been in a short sideways pattern in the past couple of weeks. The OBV line could make a new high to confirm the recent new highs for the stock but right now we have a bearish divergence. The Moving Average Convergence Divergence (MACD) oscillator is in a bullish configuration above the zero line but the two lines of the oscillator could narrow to a take profits sell signal.

Bottom line -- I wouldn't go and trade in my shares of TSLA for something else but I would raise my stop loss protection to a close below $315.

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