Tesla Share Volume Will Signal Next Move

 | Sep 12, 2017 | 3:18 PM EDT
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Tesla (TSLA) has made a large three to four month consolidation pattern. This pattern could be bullish or it could mark a reversal. It is hard to say at this juncture, but we should look at the charts and indicators and come up with two possible strategies to "be prepared" as the Boy Scouts say.

In this daily bar chart of TSLA, below, we can see a strong rally for the stock from early December to late June. Prices doubled in that time period -- amazing. Prices corrected to the downside in July and recovered into August and September. TSLA has not made a new high, breaking above the June high, but it could -- the bullish scenario. A decline back below $330 may be enough to turn the picture bearish. There have been at least three volume surges since early June -- some bullish and at least one that is bearish. TSLA is above the 50-day moving average line but the slope of the line is pointed down. The daily On-Balance-Volume (OBV) line has been neutral since mid-June. Sometimes volume precedes price so I am watching the OBV line to see if it breaks out on the upside before price do. The Moving Average Convergence Divergence (MACD) oscillator is above the zero line and just now turning upwards for a fresh go long signal.

In this weekly bar chart of TSLA, below, we can see that prices are above the rising 40-week moving average line. The weekly OBV line turned bullish in November 2016. The MACD oscillator has been weakening the past two months.

In this point and figure chart of TSLA, below, we can see what should be clear buy and sell points. A trade up to $373.26 could produce an upside breakout while a decline to $341.28 could start a bigger pullback.

Bottom line -- the trend is up but the consolidation pattern tells us to be prepared for a breakout up or down. Up or down we want to see volume confirm the move.

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