Tactical Bounce for Tesla into Year End / New YearPrimary Chart: TSLA's Downtrend Shown by Parallel Channel, Anchored VWAP from Sept. 21, 2022, Key Support / Resistance Levels
SUMMARY:
TLSA remains in a steep downtrend at the primary degree of trend.
The selling is not likely to be complete on longer time frames.
A countertrend bounce may take TSLA's price up to the following targets: $155-158 (conservative) to $163-$166 (aggressive). Countertrend bounces can fail at any time, so the odds of this working out well are perhaps lower than the odds of a downward move from key resistance levels that is aligned with the longer-term trend.
TSLA remains within a broader downtrend that has intensified over the past few months. TSLA had held up better than many other tech names and high growth names in 1H 2022. TSLA's drawdown in the first half of the year was about -50% while many tech / high growth stocks declined -70% to -90%. For comparative examples, PLTR has fallen -86.22% from its all time high, SQ has fallen -82% from its all time high, BYND has fallen -95.1% from its all-time high, and UPST has fallen -96.45% from its all-time high. TSLA so far has fallen about -65.8% from its all-time high. For many of these high-growth and technology names, including TSLA, the selling doesn't look complete.
Just as corrective pullbacks occur in an uptrend, corrective bounces occur in downtrends. TSLA has reached the lower edge of its parallel channel and looks ripe for a countertrend rally. Add bullish year-end seasonality into the mix, and TSA may see chop at a minimum, or a modest rally. The term "modest" here means small relative to its sharp downtrend since mid-September 2022 and its all-time high of $414.50. In percentage terms, the corrective rally may be considered sharp from the perspective of any shorts that may have had the misfortune of entering their positions at the lower edge of the channel.
The Primary Chart shows the steepness of the downtrend since mid-September 2022, although the stock has been in a downward correction since its ATH in November 2021. The VWAP fro mid-September 2022 also shows the ferocity of the selling given how its slope falls rapidly over the past 3 months, hovering not far above the downtrend line. Bears have been pleased with this progress. But even bears must be cautious this year regardless of how weak the stock may be.
The conservative target is $155-$158. The aggressive target is $163-166. These levels are derived from both Fibonacci analysis and resistance levels from key price points shown on the Primary Chart.
Some additional charts supporting this thesis appear below:
Supplementary Chart A
Supplementary Chart B
Supplementary Chart C
Supplementary Chart D
For the longer-term perspective, please see the following post dated November 8, 2022:
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Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
Countertrendbounce
NVDA: Placing the Rally in ContextPrimary Chart: NVDA's Primary Trend Since Its All-Time High November 22, 2021, with Anchored VWAPs
SUMMARY:
NVDA appears to have begun a countertrend rally within the context of a sharp downtrend.
Other countertrend rallies have ranged from 28.9% to 40.17%. Don't be fooled by a show of strength that does not change the overall structure. Countertrend trading is lower probability, but can be lucrative if risk is managed with great discipline.
The most conservative upside target (resistance) range for this rally is $128-$130. This would be reached, if at all, in the next week or two.
If the $128-$130 level is reclaimed successfully, then the next higher target to consider is the $145-$150 range discussed below.
Watch the green uptrend line off the YTD low on October 13, 2022 and the red VWAP anchored to the YTD low. If either is broken, all bets are off.
NVDA has rallied about 15.58% off its YTD lows on October 13, 2022. The lows have not been undercut now for a little over a week. Broader equity indices have rallied as well, with the S&P 500 and the Nasdaq 100 both gaining about 2.3% on Friday. NVDA rallied along side both these indices.
1. NVDA's rally could continue into the FOMC meeting on November 1-2, 2022. The FOMC is likely to increase interest rates by .75 percentage points at the November 2022 meeting. The CME's Fed watch tool, tracking federal-funds-rate futures products, shows the probability of a 75 bps hike at 88% for November. Have markets already discounted this? Probably. What is unknown is whether any change in the Fed's messaging will occur or will the Fed maintain its higher-for-longer hawkish stance to deal with sticky inflation. Fed officials have spoken in recent weeks expressing dissatisfaction with the current inflationary environment and its ramifications for price stability.
2. Pullbacks may likely respect the very short-term VWAP anchored to the YTD low (red VWAP anchored to October 13, 2022). Watch this VWAP for support. If the VWAP is violated, it will be important to determine if the violation is decisive (slicing through and showing no sign of reverting back to the level) or if the violation is minor and brief.
3. NVDA just closed above its 21-day EMA, which lies at 124.16. Today's close was 124.66.
4. Before any higher price targets can be taken seriously, NVDA must reclaim its 34-day EMA (currently just below $130) as well as a key Fibonacci level (teal .236 level at $128.10) (shown just below this paragraph). This is the most conservative target zone for a countertrend rally.
Supplementary Chart: Fibonacci Levels
5. A more ambitious zone for a price target may be considered only if the 34-day EMA is recovered first. This secondary target zone comprises two technical levels: (a) the VWAP anchored to the August 4, 2022, high currently located at 143.08, and (b) the gap fill area (teal-blue rectangle) at $145 to $150.
6. It remains crucial to place any rally into context, even if the rally seems like a powerful rally that is unstoppable for a while, like some of the other bear rallies in this market. Massive bear rallies can trick market participants into thinking the lows may be in, and lure them with fear of missing out. Other countertrend rallies have ranged from 28.9% to 40.17%. Don't be fooled by a show of strength that does not change the overall structure. Countertrend trading is lower probability, but can be lucrative if risk is managed with great discipline.
7. The larger context is a downtrend at the degree of the primary trend. All major swing highs and lows over the past year have been lower highs and lower lows. The anchored VWAP at the all-time high (dark purple) remains well overhead. Price would have to rally and hold the $190-$200 level to show material structural change. All other rallies will constitute noise at the larger degree of trend. In other words, the downtrend channel should contain any rallies for the time being. If not, then it becomes appropriate to consider whether a larger-degree structural change is occurring that may lead to a major trend reversal.
Please note that SquishTrade is "cautiously bullish" only for the next week. In the larger scheme, the outlook remains bearish until substantial evidence appears that structural trend change is occurring at the larger degrees of trend. This remains unlikely with interest rates breaking above a 40-year trendline as discussed in this post:
