So, you wanna short Tesla?
With the announcement it would be joining the S&P 500, Tesla ( TSLA) bulls finally received the catalyst they've been longing for since the summer. Shares skyrocketed at the open on Tuesday, touching $460 before they faded throughout the afternoon. After the closing bell, I saw several notes with bearish sentiment that the fade proved sell-the-news was in full force, and we were looking at a gap-fill. I've been burned one too many times, hinting at the demise of Tesla's stock price. My preference is to remain on the sidelines.
Calling a top Tuesday didn't work. Shares are up some $50 Wednesday, sniffing at $500. Maybe now you want to call a top? Let's take a quick peek.
On the initial glance at the price, I can see the rationale. The stock is approaching the summer highs. No doubt the huge fall from $500 back to $330 in a week's time has the attention of some bears, but the fundamental picture was a bit different back then. So was the technical picture. Telsa was stretched to the limit, after a squeeze of shorts and chase from buyers filled with the fear of missing out. We also saw a ton of options activity during that time as well that pushed not only Tesla, but many stocks.
Without Tesla coming into those highs extended, a short right here worries me. The Full Stochastics has yet to make a new high. We can't call it a bearish divergence, because it is still trending higher. The MACD index hit resistance Wednesday, but if we push through, there's a long way to go before that hits levels last seen at the summer highs. Price broke out above resistance back through September. I think it is fair to call those previous highs a double-top. Furthermore, albeit a bit sloppy, we have a "W"-shaped price pattern further fueling the breakout. The price target sits around $530.
The biggest problem with that price target is what happens if Tesla gets above $500. We have no clear resistance. Playing the top or a short side becomes random guessing. The only application I would attempt to make on the short side is applying Fibonacci extensions, but I feel as though that is a reach. Let's call it a "something is better than nothing approach."
