It was quite a day in $TSLA. After a negative analyst report from Goldman the stock slid 14%. Never mind that this is the same analyst who downgraded the stock in May at $55 and has watched the stock move 140% against him. Those that don’t have stop losses or accountability, or simply have an axe to grind will take their victories any way they can. The shorts had their day in the sun too. Here’s where we stand:-
As trend followers we have no bias. We don’t get wed to a position or take sides on the issues that surround it. Our only loyalty is to our process. We argue on the side of price and trends, whether they support higher or lower prices. We don’t discriminate. We will go long or short anything that meets our criteria without prejudice.
Tesla ($TSLA) 5/28 +7.4%
That’s one big down day, 14% on 32m shares, the biggest since 5/14, two weeks before we entered long. In fact, the 5/14 move was arguably of greater significance, a $16 range coming on the heels of an $87.80 close.
That’s an important factor in understanding why we’re still in.
If this was Johnson & Johnson ($JNJ), steadily stair-stepping higher and it suddenly had a 14% down day on massive volume, I’d have no hesitation in exiting regardless of where it was in relation to its MA’s. That’s a volatility or ATR stop. It tells you something’s changed, its behavior, its character, however you want to portray it, it’s not the stock it was yesterday or when you entered.
With $TSLA, it would be very hard to argue that. It’s exactly the stock it was yesterday and when we entered. This kind of volatility was within our expectations. We entered after it made a new closing high and even had to contend with a gap move above $100 at the open for our entry. We stated at the time we would need an initial stop 20% away in order to play this name. The price we pay for a wider stop is a smaller position size. We did all that knowing full well the volatility that could follow. And we’ve seen it play out within those expectations ever since.
So where do we stand now?
Let’s clean up the chart taking off the MA’s and the volume, and just concentrate on price and trend.
There’s a confluence of daily and weekly closes that we highlighted earlier today in the $110.33-104.68 range. A break of this is where the uptrend comes under severe pressure in my opinion. It also coincides with the ascending trendline of the closes since 5/14, and the intraday lows.
The real line in the sand however is that 6/21 daily and weekly close of $99.55. The significance of it representing a return to double figures will not go unnoticed either. A close below there and the intermediate uptrend is over.