Tesla Could Make a U-Turn

 | Nov 29, 2013 | 8:30 AM EST  | Comments
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I know I've teased you about a Tesla (TSLA) setup in Columnist Conversations, and I hope that chart gave you a heads-up that we are looking at a counter-trend trade in the stock. As a general rule, I only consider these types of plays if certain criteria is met. Specifically, when we analyze past price swings for areas ripe for reversal, we need to see both price- and timing-based parameters come together to suggest that the stock will buck the bigger trend.

Tesla (TSLA) -- Daily
Source: Dynamic Trader

Well, I am seeing a healthy support decision at the $109.63-to-$115.78 area that includes multiple Fibonacci price relationships -- that is, Fibonacci-based extensions of prior price swings. In addition, the stock is currently testing the 200-day simple moving average, a level that may act as some support to the recent decline.

So far this key support level has remained intact, and the stock has produced "buy triggers" since this zone has been tested. Besides the price analysis, I've also identified a cluster of Fibonacci time cycles that come due between Nov. 26 and Nov. 29. Note that the recent low was made on Nov. 26, directly within this time window.

Bottom line: As long as the stock fails to take out the key price support cited above, I will be taking my buy triggers in Tesla for the minimum of a short-term counter-trend trade. I will use a relatively tight trailing stop on this one. If the stock can clear resistance on the way up, it'll be fine to continue holding the position.

The first meaningful hurdle on the upside will come in around the $143-to-$144 area. I will consider myself wrong here if the stock falls through the above-mentioned support.

For more information on trade triggers, please refer here

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