by Tesla (TSLA) – Get a free report the stock was buried, as it fell in eight of the last nine trading sessions and hit new 52-week lows in eight straight sessions.
Additionally, shares are now down for five consecutive months, evidenced by the current 33.7% drop in December. From an all-time high, Tesla shares are now down 69.2%.
Some blame Tesla’s decline solely on the bear market. Others blame CEO Elon Musk who keeps selling Tesla stock as the real culprit. Musk has also been distracted by Tesla since he took over as CEO on Twitter.
The reality is that there could be a bit of all factors at play. However, the overriding theme here is an environment of rising rates and a coming recession.
Why would investors park their money in a company like Tesla when they could generate a risk-free return in Treasuries? Plus, with a recession weighing on the economy, who wants to be in an automaker?
This thought process may help explain why Tesla stock has been nearly “unbid” over the past few weeks and months.
Tesla stock trading
Tesla stock weekly chart.
Graphic courtesy of TrendSpider.com
This is a lesson in what I call “deliberate price action.”
Tesla shares deliberately it broke below a major area on the chart when it had the potential to hold this area. That area was $150.
Not only has it been a major breakout area since 2020, but it has also marked the 200-week and 50-month moving averages as well as the monthly VWAP measure.
Not maintaining this level makes a strong statement; a deliberate statement. In this case, he says the sellers are in control.
Traders who were buyers in the $150 to $160 range were right to do it.
Yes, you read that correctly. Buying in that area was the right move as the risk/reward ratio was tilted to the upside. More importantly, risk has been contained to a break of $150.
In other words: just because the swap didn’t work doesn’t mean it was the wrong swap. Remember, traders work with probabilities, not certainties.
The $150 area was a high probability setup given the number of potential support measures in place. However, it was not a zone of absolute certainty (no level is).
As far as current measures go, keep an eye on the $125 to $130 area, as this is where the 21-quarter moving average comes into play. A break of that area opens the door to the $100 to $110 zone.
In that area we find another breakout area and the 78.6% retracement from the all-time high to the 2020 covid low.
To the upside, I’m looking at the $150 to $160 area resistence until the stock can prove otherwise by claiming it. That’s right, now the previous support is likely to be the current resistance.
