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Tesla's Technical Mechanics

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Every bull run has its iconic story stock. Since the second quarter, Tesla (NASDAQ:TSLA) has been the epicenter of sentiment.
Yesterday, Tesla broke sharply to its 20-day moving average, which has been staunch support during its persistent advance. The test of the 20 DMA saw Tesla bounce back before the bell, but Tesla is gapping down again this morning, testing yesterday’s lows.
In so doing, Tesla has carved out a large range outside down week and is flirting with a possible Key Reversal week on a close this Friday below 177.11.
Weekly TSLA Chart for 2013:

Checking the daily Tesla below shows that a possible measured move from the 104.50 mid-point ties to 197ish. This week's record high in the stock was 194.50. The market is not a fine Swiss watch, and in my experience, a few percentage points from an idealized level is often times close enough for government work.

On the Square of 9 Wheel, 104.50 is 2 revs of 360 degrees in price or 720 degrees up from the 39-to-40 major pivot low and breakout. Two additional squares up from 104.50 is 202. How do you reconcile a possible idealized "target" of 202 along with what looks like a weekly signal reversal bar being carved out this week? Well, 104.50 is straight across and opposite October 8. As W.D. Gann stated, “Time is more important than price.” Next week looks pivotal. You always want to use "the week of" in swing trading.

Click to enlarge

Often, the first mouse gets the squeeze while the second mouse gets the cheese. This simply means that the first sell signal (or buy signal in the case of lows) often sees a squeeze as many players jump on the band wagon and get squeezed and stopped out on new highs.
This type of action is often magnified in stocks that have carved out tremendous parabolic advances in which the vast majority of those who believe in the story are sold out bulls, plus there are more than a few bears who have taken short shots at the stock and have been burned. Succinctly, in runaway names, there are typically more players who have missed the lion's share of the move or been shaken out than there are who have steadfastly held on. While it is human nature for some players to want to "shoot" at a high flyer like Tesla, that seems to ignore the laws of gravity because there is a lot of "juice" in it. This is not a conceptually correct trading concept: there is a reason why the adage "don’t fight the trend" is so well known. It may seem like a cliché, but clichés are so-called because they often hold so much truth.
So, next week looks pivotal for Tesla. Will it backtest its highs or even squeeze higher toward 200-202 in front of October options expiration?
The important thing to remember is not to confuse the company Tesla and its product with Tesla the stock. It is a great car that has won several awards. It is disruptive technology, but the company is one thing and the stock is another. Marrying a story stock can be the kiss of death when the trend turns.
I have produced a user friendly physical Square of 9 Wheel that is 2 ½ X 2 ½ feet. It comes with a phone consultation in which I explain how to use it and I share what I've learned using it for the last 25 years. If interested, please contact me at

Editor's Note: This article is a free edition of Jeff Cooper's Daily Market Report. For a two-week FREE trial of his daily commentary and nightly day and swing trading picks, click here.
POSITION:  No positions in stocks mentioned.