Want in on Tesla? Charts Say Time Is Nigh

 | Feb 01, 2016 | 9:30 AM EST
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tsla

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spy

I'm stalking Tesla (TSLA) for a trading low for a number of reasons. This opinion is based on both Fibonacci price and time analysis. Let's start by looking at a weekly chart of this stock.

Tesla (TSLA) -- Weekly
Source: Dynamic Trader

Cycles will not always repeat themselves perfectly, but they do often enough to pay very close attention to them. There is a time cycle that I've identified in TSLA on the weekly chart that has produced some very healthy changes in trend in TSLA in the past.

This first chart illustrates the important lows that were made anywhere from 22-25 weeks apart from each other. You'll see that most of the lows came in 22 and 23 weeks apart from each other. There was one cycle on the outside that was 25 weeks long. So, one of the reasons why I'm stalking a low now is that we are currently at the recent low 22 weeks from another very important low. As far as price is concerned, we are currently closer to support on this same weekly chart ($174-$179 handles). Price has already extended from the major low to high, which means it is in the position to terminate this decline. Let's take a look at the daily chart next. 

Tesla (TSLA) -- Daily
Source: Dynamic Trader

On the daily chart of TSLA I'm also seeing some shorter-term time cycles for a low at the recent lows. Also on this chart you can see that we had an exact test of key support at the $179-$182 area. So far, we've only seen some minor or short-term buy signals against these time/price parameters. I'm not convinced we have a major low in place just yet, but this is when we want to watch for one and focus on the buy side rather than the sell. It might even take a couple of entries before you see a sustained rally in this one.

What will really make this stock look a bit better technically will be a rally through overhead resistance at the $205.50 area. Bottom lin:, I'm focusing on the buy signals in TSLA at this point. I'm wrong if we take out the key support. Now let's quickly review the next decisions in the SPX. 

S&P 500 -- Daily
Source: Dynamic Trader

Our last key decision in SPX came in with the cluster of Fibonacci time cycles that came due between Jan. 19-22. A low was made directly into this time window on Jan. 20, which was followed with some healthy buy signals. At a minimum I was looking for a corrective rally to unfold from that window. That has been accomplished so far. So what's next?

S&P 500 -- Daily 2
Source: Dynamic Trader

At this point in time we are still looking at a bearish pattern of lower lows and highs from the recent high in November. Also, the fact that we are still clearly below both the 200-day and the 50-day simple moving averages tells me to watch for a possible failure of the current rally and resumption of the decline. Now I don't know if this will definitely happen, but I do know what times and prices to watch to anticipate this possibility. As far as timing the Feb. 2-5 cycles stand out as a time window for a high to unfold. This is a good time to start trailing up stops on any long positions just in case these cycles kick in.

It is also a good time to stalk the market for a short. As usual, I want to wait for sell signals that tell me to both exit the long side and consider the short because if we don't see the reversal indications, I have to consider that the Jan 20 may be more important in the bigger picture instead. In other words I will be wrong as far as anticipating a reversal back down. As far as price is concerned, I have some areas for possible resistance to focus on with the daily chart below. 

S&P 500 -- Daily 3
Source: Dynamic Trader

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