Tesla, Inc. (NASDAQ:TSLA) Trading the Technicals

Tesla, Inc. (NASDAQ:TSLA) Trading the Technicals

Tesla, Inc. (NASDAQ:TSLA) Trading the Technicals

Ever since Elon Musk’s now infamous tweet on Aug. 7, 2018, Tesla’s stock price has been on a roller coaster ride.

Although this episode has led to a number of market and legal consequences, it has broader implications for boards and corporate governance in our increasingly digital age.

To gain some traction on this, it is important to start at the beginning – on Aug. 7, 2018 Elon Musk, CEO and Chairperson of Tesla (and a few other firms), tweeted “Am considering taking Tesla private at $420. Funding secured.” Prior to the tweet, Tesla’s stock was trading at about $357 per share so suggesting a price of $420 was a substantial premium over the then market price.

This, unsurprisingly, generated a large stock price response with Tesla’s stock closing that day a little above $379. However, the fact that Tesla’s closing price was still substantially below the $420 mentioned in the tweet suggests that the market was somewhat skeptical of Musk’s proposed going private transaction from the beginning. Nonetheless, when the tweet was retracted a few weeks later there was substantial controversy and negative publicity for both Musk and Tesla.

The SEC also sought, as one of its remedies, to prohibit Musk from serving as an officer (which likely would have caused large declines in Tesla’s stock price as well as perhaps other firms – such as SpaceX – of which Musk was the CEO). This then led to a renewed round of intense negotiations culminating, some two days later, with a settlement on the following terms and conditions:

  1. Mr. Musk will continue as Tesla’s CEO and step down as its Chairperson (to be replaced by an independent Chairman). Mr. Musk will be ineligible to be re-elected Chairman for three years.
  2. Mr. Musk and Tesla will each pay a separate $20 million penalty. The $40 million in penalties will be distributed to harmed investors under a court-approved process.
  3. Tesla will appoint a total of two new independent directors to its board.
  4. Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications.

This settlement seemed to acknowledge Mr. Musk’s critical role at Tesla and the very negative reaction for Tesla’s share price, should Mr. Musk no longer be permitted to be CEO – presumably something the SEC wished to avoid. In spite of this, even after the settlement, Mr. Musk has continued to tweet negatively about the SEC (calling it the “Shortseller Enrichment Commission” in a recent tweet) and shortsellers in general. This has only contributed, along with other factors, to Tesla’s continuing yo-yo price movements.

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

By the way, prices are vulnerable to a correction towards 300.16.

The projected upper bound is: 298.77.

The projected lower bound is: 215.16.

The projected closing price is: 256.96.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 2 white candles and 8 black candles for a net of 6 black candles. During the past 50 bars, there have been 24 white candles and 26 black candles for a net of 2 black candles.

A hammer occurred (a hammer has a long lower shadow and closes near the high). Hammers must appear after a significant decline or when prices are oversold (which appears to be the case with TESLA INC) to be valid. When this occurs, it usually indicates the formation of a support level and is thus considered a bullish pattern.

A hanging man occurred (a hanging man has a very long lower shadow and a small real body). This pattern can be bullish or bearish, depending on the trend. If it occurs during an uptrend it is called a hanging man line and signifies a reversal top. If it occurs during a downtrend (which appears to be the case with TESLA INC) it is called a bullish hammer.

A long lower shadow occurred. This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 26.3367. This is not an overbought or oversold reading. The last signal was a buy 1 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 40.91. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 24 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -74. This is not a topping or bottoming area. The last signal was a buy 1 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 6 period(s) ago.

Rex Takasugi – TD Profile

TESLA INC closed up 6.550 at 258.780. Volume was 32% below average (neutral) and Bollinger Bands were 6% wider than normal.

Open High Low Close Volume___
261.000 261.990 252.010 258.780 7,201,404

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 273.15 304.24 313.38
Volatility: 121 89 69
Volume: 12,299,249 11,261,675 8,634,788

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

TESLA INC is currently 17.4% below its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of TSLA.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on TSLA.O and have had this outlook for the last 4 periods.

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