Tesla (TSLA) — here’s the measured move estimate. (December 16, 2014)
Let’s go back to Tesla ( NASDAQ:TSLA ) here. I’ve talked about this a few times in this “Free Chart of the Day” series. I’m not particularly enamored with this stock; you can make a lot of money on this stock, on the short side, not on the long side. “Teslonians” you can stop now because I’m really not going to say anything positive about the price movement; love the car but as far as the stock, I’ll probably buy my next Tesla with the money that I make from shorting the stock.
Here’s the thing, this isn’t like a picture perfect head and shoulder pattern that I’m going to be showing you here because you can draw it ninety different ways. Also, a head and shoulder pattern is a reversal pattern, and that means by definition, there must be something to reverse. We’ve had this uptrend here, we’ve had this uptrend here, we’ve had this uptrend here, but just kind of generally speaking the stock’s been basically trending higher.
So what do I think I can get out of this short side, where is my price target? Here’s one way I calculate it, I’ll look at this as a key low, and this as a key low, I’m trying to get a head and shoulder pattern here, so I draw the line this way. Then I look at the left shoulder here, it’s a high; then I look at the head here, it’s a higher high. Either one of these is fine actually, but I’ll say this is the lower high, and then finally we’ve got a breakdown through there.
If this is going to be a text book head and shoulder pattern we’re actually going to get a throw back, a little bit of a test here, and then a move lower. Maybe we’re going to get that, maybe we’re not, but what I want to do is take the difference between this and the neckline, right there. What you do is you take that number and then you draw that number again from where the neckline broke down, which would be here, and you extend it down and you say, “Okay, that’s the measured move.”
The distance between the peak and the neckline should, at a minimum, go the distance from the neckline down to the minimum price target here. So let’s do this here, you can do it pretty easy; here’s the top, I’ll drag this down to about where I think the neckline is between there and there, so right about here is where it is. That’s like 75 points, so we’ve got 75 points between the high and where the stock broke the neckline.
Now what we need to do is take 75 and subtract it from this level right there to give us our price target. So this level right here is about 219, 220, something like that. So we draw this down, and look at the box on the left side, down at the bottom you can see, at the very bottom of the small vertical box you can see 31.83, 35.95, those are the points. So we take this down 75, we’re down at like 143.00, that’s a price target for Tesla ( NASDAQ:TSLA ).
I know what some of you are thinking; I can just see your shocked face right now, “Oh! How can you say that?” Well, I can say that pretty easy dude, it’s been down at 143.00 like just about the beginning of this year, so this is not like it’s a 2005 price, it could easily fall down to 143.00 this time around. Am I expecting it to do that? Well I’m not trading like it is but I will tell you I’m looking at 150.00 and I can see this stock taking another 25 percent haircut the way it’s trading now, not in a straight line so you trolls can stay off of Twitter jamming me on that too.
I’m just saying that this stock could fall another 50 points to test 150.00. Tomorrow, the next day, the next day after that, no, but that’s the measured move based on a simple head and shoulder pattern. I’ll tell you one thing, when I look at the weekly chart I see a stock that looks like the last scene of “Thelma and Louise”, which was actually quite majestic, all you’re missing here is a little trail of dust off the rear wheels here. So stay away from Tesla ( NASDAQ:TSLA ) unless you’re shorting it, in which case you can play “Trade Along With Dan.”
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