pebblewriter

Tag: TSLA

  • TSLA: To Infinity and Beyond?

    Few stocks exemplify the current excesses of the stock market better than TSLA. In our last posted update on Jan 30 [see: TSLA on Autopilot?] we noted that it was approaching the top of a channel and a potential Fibonacci reversal point at 653.26 [131.15 post-split.]  We noted at the time:

    If it reverses here, the nearest support is at the 10-day moving average at 550, with 521 [104.20 post-split] being the nearest strong support and the previous high of 389.61 [77.92 post split] the next most likely.

    That weekend, ARK Invest said it estimated Tesla shares would be worth about 7,000 (1,400 post-split) by 2024.  And on Monday, Argus analyst William Selesky boosted his 12-month price target on the shares from 556 to 808 (161.6 post-split.)

    With such bullish tailwinds, TSLA gapped past the 2.24 extension on the open Monday morning and broke out of the channel, reaching the 3.618 extension at 190.29 the following day before running out of steam.  By Mar 18, it had plunged to its 77.92 previous high, shedding a stunning 64% in 6 weeks.

    In previous posts [see: Can TSLA Survive This Crash?, Is the Pressure Getting to Elon Musk? and TSLA Skids Into An Important Target] we have noted Elon Musk’s propensity to “support” the stock at important inflection points.  Remember “Funding Secured?”  Remaining above its 200-day moving average and previous highs certainly qualified as important.

    Since Mar 18, TSLA has soared an astounding 750%, surpassing even Selesky’s revised Aug 31 target of 566 following several sessions reminiscent of February’s blow-off top. Is there an end in sight?

    continued for members… (more…)

  • TSLA on Autopilot?

    Ignore the sales projections and the hype. Keep an eye on the channel top and 2.24 Fib extension at 653. If it reverses here, the nearest support is at the 10-day moving average at 550, with 521 being the nearest strong support and the previous high of 389.61 the next most likely.

  • TSLA Skids Into an Important Target

    We started posting about TSLA a little over a year ago when it dipped below important horizontal support [see: Can Tesla Avoid a Crash?]

    We’ve updated the charts multiple times since then, working to stay ahead of Musk’s obvious attempts to manipulate the stock.  The harmonic picture has been tricky due to the presence of two Point X’s which produces two different grids – the purple and the white.

    TSLA dipped below the white .618 in March (and multiple times afterwards) bolstering the argument for the purple grid.  But at times it has appeared that the white grid aligned nicely with channel lines such as this chart from last September which officially triggered a short call at 289 [see: Crypto Carnage] which was reiterated at 291 on April 3 [See: Can TSLA Survive This Crash?] and targeted 202.29.

    The Better Late Than Never Department has notified me that TSLA just crashed into 202.29, nearing the completion of this particular leg of its journey.

    Given that OPEX is in the rear view mirror and the futures are about to break below support again, we have to wonder whether TSLA is done.continued for members… (more…)

  • It’s a Wonderful Market

    SPX and ES had no trouble reaching our initial downside targets — a backtest of their January highs.  We wondered, however, whether the SMA20s, loitering just below, might come into play.

    Sure enough, ES tagged its SMA20 with ease.  But, emini traders strongly resisted a drop through the SMA20 – bad mojo, don’t you know.

    So, SPX only reached 2867.29, just shy of the SMA20 at 2866.27. And, faster than you can shout “help me Clarence!” SPX bounced the 16 points we anticipated, just like it did on Wednesday.

    It was a near miss..or, was it?  As we discussed on Tuesday…

    One little trick we often see on days when it’s difficult to convince the machines to sell/short down to an obvious bounce point such as the SMA10 is to drive the price merely to where the SMA10 will be tomorrow.  The SMA10 will likely increase by another 5 points tomorrow, so getting within 2-3 points is potentially “good enough.”

    As luck the algos would have it, today’s SMA20 came in at…wait for it…2866.27.  January highs and SMA20 were both tagged.  So, all is well, right?  Not so fast.  Futures are currently off 10 points, banks are tanking, oil and gas are slipping, FB is scurrying toward the basement and TSLA has tumbled 15% since Tuesday’s short call.

    In the distance, sirens.  A mob of nervous investors crowds the door.  Might the Building & Loan actually be in trouble?

    Thanks to overeager algos, the S&P 500 has thus far ignored the threats of tariffs, political turmoil, emerging market meltdowns, rising interest rates and historically high multiples. None of that matters as long as corporations can borrow cheap and repurchase their own shares, VIX can be hammered when necessary, the dollar continues rising and oil/gas prices don’t crash.

    If any of those support mechanisms falters, however…  Well, we’ve seen what can happen.  Keep an eye on 2867.29.

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  • How Not to Manipulate Stock Prices

    Sometimes you just can’t catch a break.  TSLA shares rose from 22 in 2012 to 387 in 2017 — helping drive Musk’s net worth to well over $20 billion.  But, the shares have since formed a triple top, failing to top 390 and coming perilously close to breaking down.

    This isn’t the first time Musk has faced such a challenge.  The stock spent three years trying to crack 290 – the red trend line below.

    We’ve documented past interventions — which have, by and large, been successful.  Musk’s well-publicized $25 million open market purchase (the white arrow) on June 12-13, for instance, saw the stock gap past the .618 Fib level and a trend line connecting recent highs.

    It was a nice gesture and helped divert attention from the mass layoffs announced the day before.  But, it didn’t take long for investors to realize that while $25 million is a lot of money to most people, it represented only 1% of Musk’s net worth.  And, it increased his holdings of the common stock by a pittance (0.2%.)

    It’s pretty obvious why Musk did it.  After breaking above 290 in April 2017, the stock had fallen back below it in March 2018.  The 200-DMA, rising white channel, and purple trend line all broke down in the process.

    After a miraculous, tweet-aided recovery, Musk got the stock back above the red trend line.  But, he needed it above 390.  It was not meant to be.  Too many missteps, too many worrisome headlines.  The best it could manage was a backtest of the broken white channel and the .886 retracement of its drop from 389 to 244.

    The stock slipped back below the red TL and 200-DMA, eventually bouncing off 290 yet again in late-July on news of a major new factory to be built in Europe.  The company’s earnings call a few days later featured a well-behaved Musk, a revenue (obviously not income) beat, and a promise not to float additional additional shares.

    Musk: We do not — we will not be raising any equity at any point, at least that’s — I have no expectation of doing so, do not plan to do so … And we certainly could raise money, but I think we don’t need to and we — yeah, I think, it’s better to — it is better discipline not to.

    Again, the stock gapped higher — back above the 200-DMA and the yellow trend line.  But, the naysayers weren’t having any of it.

    Despite having produced the promised number of Model 3’s, the company was dogged by reports of quality issues and was losing money on every sale — even though these were the higher end models with potentially larger profit margins.

    This was apparently the point when desperation set in.  As we discussed at the time [see: Is the Pressure Getting to Elon Musk?] it was fairly obvious to any competent chartist that Musk’s going-private tweet — like all the others — was designed to get the stock over the latest hump.

    It didn’t take long for Tesla watchers to question the deal.  The financing was supposedly secured, but no one stepped forward.  The board seemed genuinely alarmed.  Shorts launched lawsuits.  And, the SEC announced an inquiry.

    The latest rally ran out of steam at 387 – just shy of the September 2017 highs.  The stock tumbled back to the red trend line yet again.  It bounced, but that was before Friday night’s (11pm Friday night, following Thursday’s decision) admission that the going-private transaction was dead in the water.  As of this morning, the stock is heading back toward 290.

    Despite my cynicism, I’m rooting for Elon and Tesla.  We obviously need alternatives to carbon-based transportation for many reasons.  But, the stock is at these lofty levels based on the (aging) premise that it’ll soon be self-funding and turn a profit.

    The shorts are right to question this premise.  But, anyone who shorts at these levels, before the stock breaks down below the tangle of support at 290ish is ignoring the obvious — this is a CEO who will do whatever it takes to prop up his stock.

    TSLA might ultimately come crashing down.  But, I would absolutely wait until the purple trend line and horizontal support break down before jumping on board.

    Now, on to the rest of the market.

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  • Charts I’m Watching: Aug 20, 2018

    Futures are hanging on to a 4-pt gain, primarily on a continuing decline in VIX.  With Jackson Hole coming up, we could see more volatility — particularly if Fed speakers back off their hiking schedule.

    Speaking of backing off…TSLA is back down to its horizontal and trend line support.  As readers will recall, this is a critical line in the sand.As we concluded last May [see: Can TSLA Avoid a Crash?] a drop through this key level could easily land the stock below 200.  Our chart from back then, before the craziness really got going…

    Apparently JPM has also adopted this view.  And, an increasing number of observers are coming to the same conclusion we did a couple of weeks ago regarding Musk’s emotional state [see: Is the Pressure Getting to Elon Musk?]

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  • The Market’s Latest “Lucky” Bounce

    That’s a relief!  For months, pundits have been arguing whether the Fed needed to hike interest rates three times or four times this year — you know, because of all the growth coming down the pike.

    Fed Über-Dove and “Man Who Thinks Market Integrity is Overrated” Jim Bullard just announced that the correct number is zero.  That’s right.  Everything is perfect just like it is.

    Amazingly, and quite by coincidence, this pronouncement occurred on the exact same day that several stock market indices were in danger of falling below a very important technical level of support: their 200-day moving averages.  As we discussed on Monday, falling below the SMA200 isn’t usually very healthy for markets.

    For visitors and new members, this seems like a good time to take a walk down memory lane.  This isn’t Mr Bullard’s first rodeo.  Nor is it the first time “someone” did something clever to ensure the market’s continued ascent.

    The S&P 500 illustrates the phenomenon quite well, having experienced a number of such fortunate events at crucial times. October 2014 – Bullard!

    Bullard appeared on Bloomberg to explain that another round of QE might be in order. As “luck” would have it, this enabled SPX to reverse right as it reached important Fibonacci support, ending a 9.9% tumble and narrowly averting an official correction.

    Big assist from USDJPY, which soared 16% over the next 7 weeks in spite of the fact that more QE should have weakened the US dollar.  The Yen Carry Trade in all its glory.

    August 2015 – USDJPY!

    This 12.5% correction was set up by USDJPY falling back below a critical Fibonacci level (the .618 at 120.11) in the wake of SPX reaching a key Fibonacci extension (the 1.618 at 2138.)

    We had correctly forecast the top [see: The Last Big Butterfly] but it was unclear whether or not USDJPY could remain above 120.  SPX plummeted when 120 finally fell but, as “luck” would have it, was (temporarily) rescued by USDJPY’s bounce back above it.

    February 2016 – Oil!

    The price of West Texas Intermediate Oil (CL) had fallen 77% between Aug 2013 and Feb 2016.  While this crushed inflation to a manageable level, it made investors in and lenders to energy-related companies pretty nervous.

    As “luck” would have it, CL bottomed out on Feb 11, 2016 — the exact same day that SPX reached that critical Fibonacci support level of 1823.  CL doubled over the next four months, and SPX rebounded sharply.  By accurately forecast the bottom in oil, we could confidently call a bottom for SPX [see: USDJPY Finally Relents.]June 2016 – USDJPY!

    Stocks plunged in the wake of the Brexit vote.  As “luck” would have it, USDJPY — which had used CL’s rally as an opportunity to reset — picked this particular day to bottom out and spiked 8% higher over the following month.

    Futures had sold off by 6.5%, but by the time SPX opened the next morning the recovery was well underway.  It was soon back above its recent highs and the critical 1.618 extension at 1.618.  In other words: new all-time highs.

    November 2016 – Trump*!  Unfortunately for stocks, the US election results weren’t conducive to a rally.  Once Trump’s election became apparent, futures plummeted over 5% in a matter of hours.  SPX had bounced off its SMA200 a few days earlier.  Unless something was done quickly, it would drop through this key support the following morning.As “luck” would have it, USDJPY picked this particular day to bottom out.  It spiked 5% over the next few hours and 18% over the next few weeks — a supersized version of the exercise which had saved stocks post-Brexit.

    And, if that weren’t enough, VIX — the widely accepted indicator of fear and volatility — plummeted even as futures were plunging.  It’s the equivalent of calling your insurance broker to cancel your homeowner’s policy as a hurricane bears down on your beach house.  How very, very “lucky” indeed.Futures recovered almost all of their losses by the time the cash market opened the following morning. VIX went on to shed over 50% of its value and broke down through trend line support (above, the white arrow.)

    Stocks were soon registered new all-time highs. The talking heads called it the “Trump Rally” and attributed the gains to the incoming president’s pro-business orientation and deal-making acumen. But, I think it deserves an asterisk…on account of the incredible “luck” involved [see: Why the Trump Rally is a Fraud.]

    The SPX chart isn’t labeled as such, but the rise from 2138 to 2703 (the next major Fib level) wouldn’t have been possible without continued support from oil and VIX.  After doubling in value, CL proceeded to construct a well-formed rising channel (below, in purple) that was very supportive of stocks.  It oscillated between the channel’s top and bottom like clockwork — until December 2017.  We’ll come back to that.Also during that time, VIX was trying something new.  After years of occasionally bouncing off the bottom of a long-term channel (below, the yellow arrows) it decided to plunge below that channel bottom and spend 80% of its subsequent days in the cellar — reaching new all-time lows in the process.This sent a strong all-clear signal to stocks (or, at least the algos that trigger stock purchases) that the coast was clear. It was completely safe to buy stocks, which they did — producing a rally that accelerated all the way up to the 2.24 extension at 2703.

    December 2017 – Oil!

    At that point, oil’s breakout (remember the purple channel above?) and the onslaught of new, daily lows in VIX combined to give SPX the boost it needed to climb above that resistance.  I mean, how “lucky” can you get?  It popped above 2703 and tacked on another 6.3% for good measure.

    Unfortunately for stocks, though, there was a practical limit to how high CL could go without creating problems.  Someone had forgotten that higher oil prices mean higher inflation.  And, higher inflation means higher interest rates.  And, when you’re $21 trillion in debt and pass a tax bill and budget that greatly widen the deficit considerably…higher interest rates are not exactly lucky [see: Why Higher Interest Rates Are a Problem This Time.]

    Between that realization and a growing disconnect between price and supply & demand, CL had to drop.  When it did, and the (dashed, red) trend line from August 2017 finally broke down, stocks didn’t take it well.SPX plunged almost 12% over the next two weeks, one of the sharpest corrections ever.  Luckily, the SMA200 was there to catch it.  A few days later, CL popped back above its channel top and SPX recovered to back above 2703.

    As the bounce began to fade, we had a surprise message from Bullard that “too many rate hikes could slow the economy.”  It was enough to extend SPX’s bounce for another few weeks.  But, ultimately it slipped back down below 2703 to tag its SMA200 again.  And, again.  And, again.  And, again.

    By then, DJIA and RUT had finally risen to the point where they could tag their SMA200s as well.  SPX bounced at our 2561 target.  Investors were in luck!  Until this morning.

    April 2018 – Bullard!

    Apparently, someone forgot to explain to the Chinese that we were supposed to win the trade war (winning them is easy!)  This morning, we found out that China had the gall to fight back.  When I was woken by an price alert at 3:15 this morning, the futures were off 55 points.  SPX would open back below its SMA200.

    But, the futures didn’t know what they were up against!

    Then came Larry Kudlow, the guy who in May 2008 called the impending Great Financial Crisis a “non-recession recession.”  Some people might have misunderstood; but, obviously he meant it would be much worse than a recession.  (I can’t wait to find the pot of gold!)

    As “luck” would have it, the market was quite pleased with all this positive scuttlebutt.   ES, once down 55 points, closed up 34 points.  SPX and the Dow rose about 1%.  RUT added 1.30%.  And, COMP — which never did tag its SMA200 — popped 1.45%.  Take that, 200-day moving average!

    Bounces are nice, whether driven by oil, the USDJPY or Fed cheerleaders.  This one got SPX back above its SMA200, which is a good start.  Next comes the 2.24 Fib, which SPX has crossed some twenty times in the past two months.  Can it rise back above and stay there this time?

    Oil’s limitations haven’t disappeared.  Managing inflation and interest rate expectations will continue to dominate its price action.  Lately, the market has a very narrow range within which it feels comfortable.

    USJDPY is threatening to break out from a falling flag pattern, but one has to wonder why it hasn’t done so already.  Japan got no love from Trump in the trade war chatter to date.  It’s quite possible they’re done cooperating with currency intervention. VIX, after popping back above the yellow channel bottom in dramatic fashion in February, has fallen back to a trend line (red, dashed) from its January lows.  Every time it pops above the trend line, SPX stumbles.  Every time it drops below it, SPX rips.  Today, it tagged it and reversed lower – hence the day’s gains.  It has plenty of additional downside potential, with the potential to drive stocks back above 2700.  But, again, it hasn’t done so yet.

    It makes one wonder whether SPX will be allowed to put in a lower low in order to make the corrective wave look a little more conventional and give COMP a shot at its SMA200.  We have oodles and oodles of downside targets if SPX’s SMA200 should fail.  That white dot at 2138 in the chart above is there for a reason [see: More Where That Came From.]

    There are countless other factors I haven’t even mentioned: our yield curve model (which tentatively turned bullish today), 10yr note rates, the US dollar’s buoyancy, various momentum indicators, and the continuing sagas of FB, TSLA, AMZN and DB — all of which have played a role in the market’s gyrations (mostly of the bad luck variety.)

    Whatever happens, it’s hard to imagine we could reach new highs without plenty more luck.  Trade safe, and stay tuned.