Want to know whether Tesla (TSLA) is toppy? Look at multiple timeframes.
Discussed in this article: Tesla Motors Inc. ( $TSLA )
I’m looking at Tesla ( NASDAQ:TSLA ) and I want to explain how I’ve been looking at this. Quite a while ago, I think it was after this, this is not exactly a bold call by the way, so don’t think I’m patting myself on the back, I’m not, this should be kind of intuitively obvious to all but the most casual observer. When the stock broke out here, my suggestion was that this stock would hit 200.00, at least 200.00 before earnings and that’s the way I’ve been trading it, I traded this part, I’m just going to tell you, I lost my commitment and I allowed myself to close a pretty big position. Frankly, I forgot about what I’d said and it just seemed to me the way this was going and actually I think it kind of had to do with my mood at the time, yes it’s true, I think sometimes unless you’re a peer systems trader, sometimes your mood will impact your trading, so just keep that in mind. If you’re taking notes on your trades, which I highly encourage, one aspect of your note taking should be how do you feel, how I feel today.
I’m looking at Tesla ( NASDAQ:TSLA ), they announce earnings next Wednesday, I’m not a Teslonian or anything like that, I’m not a total fan and think the stock’s going to the moon, so if anybody posts or makes some bearish argument on Tesla ( NASDAQ:TSLA ) I get personally offended, I don’t care. There’s a bid and an ask on every trade; when stock does exchange that’s an agreement on price, it’s just a disagreement on direction, so that’s the nature of the beast. But Tesla’s ( NASDAQ:TSLA ) working, and frankly, I guess if I had to pick a target over the next week, just because of the way this thing’s been trading, the way it’s been banging against 200.00 for like three days, and at least as of now, and I’m doing this video three hours before the market closes, so I’m doing this video at 1 o’clock Eastern Time; the way this is looking right now, it looks like it’s finally breaking through 200.00 for good, at least until earnings.
So as I look at this trend I’ve got to just extrapolate, just draw a line. Now we’ll go out like five more bars, and if it continues on this trajectory I can see it getting to 210.00 before earnings, maybe a little bit below, but what I’m looking for is 210.00, and so I’m going to be trading it that way. I have no idea what I’m going to be doing around earnings, if I’m going to hold it, or fold it, or hedge it, close half, et cetera, et cetera. What I wanted to show you in this video doesn’t really have much to do with this chart, I had to frame the analysis; so I think Tesla’s ( NASDAQ:TSLA ) going higher. But let’s say I’m kind of a Nervous Purvis here, and I see this thing, right as of now where’s the high over here 202.20, the high here today has been 202.72, right now it’s 201.81; so this has printed an all time high today, now we’re just seeing where it closes.
But I want to look at this intraday, I do this all the time and you may find it of value or you may not. Let’s say I’m concerned that Tesla ( NASDAQ:TSLA ) is topping out for the day, so I go on the 1-minute chart here, forget about the moving averages I’m just too lazy to change them, but they do help. So I’m looking here at the 1-minute chart, now mind you, this is 12:30, it’s 1 o’clock right now, so this is 30-minutes of trading, I’ve seen this uptrend, now I see this, and “Oh my gosh, it’s coming back to test this resistance, I’ve got to ditch this thing before it falls to $200.00.” Let me look at it in multiple time frames, that’s actually looking a little bit better, kind of looks almost like the daily chart.
This stock has rallied up, come back down, and now it looks like we’ve got support right about at 201.00 on a 5-minute bar chart. I’ve been trading this for weeks, 5-minutes doesn’t really move me, so I want to zoom out more, to 10-minutes, now I see big, massive move up in the morning, Yay! Because I actually did really not like this at all, and I wasn’t particularly fond of yesterday, and I sure as heck wasn’t particularly fond of Tuesday’s close. But the stocks’ working for us now, but lately it’s been in this sideways consolidation. Now you can change your view here, just kind of zoom way in, and then what do you get? Oh it’s range-bound, oh it’s flat, but then when you really zoom out and you get a better perspective, I’m looking a this, and it looks like it’s about ready to take off.
I had a price alert to tell me when the stock went above $200.00 so that I don’t have to monitor the silly thing all day. I see this stock moving higher, now it has pushed above the upper Bollinger Bands on many occasions so I’m looking at this now, the upper band is at 202.67 so I pretty much expect the stock to hit that. Now, as each print goes by, each 10-minute bar chart, this Bollinger Band is going to fall lower, but right now it’s a 202.68; so here’s what I’m going to do, I’ll set another price alert, I don’t want to get hit with it all day long but I want to hear about it right away. So I want it to be noted the first time it passes 202.68, because that would be a good thing for me. Okay, so I set this price alert and now I don’t have to worry about the upside, it’s back above 202.00 again, so I don’t have to worry about monitoring the upside anymore because I’ll be alerted.
I’m not concerned about the down side right now because that’s not what I’m talking about in this video. Also, this is the pattern that I’m trading, so where am I going to set an intraday price alert? The only thing an intraday price alert on the downside is going to do is shake me out; so I’m not going to do that. I know what the daily chart looks like; I know this is an up day, so I want to go out further. I see, in a 15-minute chart, kind of the same thing, I go out further, 30-minutes, okay now this is looking kind of interesting, let’s go out to an hourly chart, now this is looking very interesting and here’s why: if you’ve been following my stuff for a while you know that I love Bollinger Band squeezes, I love these volatility squeezes, when I see this, I see this. If I trade it correctly I’m going to make money here.
This is how I analyze these things, you see this squeeze, the breakout is Phase 1, that’s when the stock initially breaks out. Phase 2 is when this initial breakout stalls, at least it won’t keep going up, that’s why I call it phase 2, its a different phase it’s the correction, it’s the counter move, it’s going to pull back. The idea is, if the stock pulls back to the area of the breakout and then bounces, that’s a good thing. If it pulls back further like into the squeeze area, and then bounces, that’s okay, though it shows that there’s more weakness in the stock and I thought. If it falls down to this level then that’s just telling me that this was a fake out and then I need to either pay closer attention, or I need to exit the trade, depending on how I’m applying this analysis. This gives me a better sense of what’s happening with the stock, than this does, the 1-minute; it’s too much noise.
If you’re going to look at 1-minute charts there’s only two reasons. You look at a 1-minute chart if your day trading, you need to see what the stocks doing because what you’re basically doing is trading buttons. You know some guy at Goldman Sachs ( NYSE:GS ) is buying five or ten thousand shares and hits the button, you’re going to see that on the screen because the stocks moving. In this minute, right now it’s traded four thousand shares so this isn’t exactly General Electric ( NYSE:GE ). The 1-minute chart gives me some information, the other time you’d be using the 1-minute chart is if you’re actually buying something or selling something. If you’ve made a decision on the daily chart, “You know what, I want to buy Tesla ( NASDAQ:TSLA ).” That’s my decision; it’s called the decision action sequence. I made the decision to buy it, now let me figure out how I want to buy it.
I’m looking at this and I would say, “You know what? This is actually a pretty good time to buy, on the 1-minute chart.” So we’ve looked at the hour, now let’s look at the four-hour and you can see this is actually in a pretty nice solid uptrend. I can go on and on, but I’m not going to, the point is, when you are looking at a stock like this, particularly one frankly, that’s whacked you around a little bit, the stock doesn’t know it did, it doesn’t know who you are, and frankly if it did it wouldn’t care about you. In fact if it really did it would do everything it could to take all your money, because that’s what stocks do. So if you’ve had some losses on a stock you’re kind of a little bit skittish. When you’re feeling that way you’ve got to get that out of your system, you can’t trade from a position of weakness; if you’re going to be trading from a position of weakness then you shouldn’t be trading. One way to get through a position of weakness frankly, is not to trade, go meditate, go read a self improvement book, or something to make you feel good about yourself, but you’ve got to be coming in here from a position of strength.
So when you’re looking at a stock like this you’re going to be using the intraday charts to give you a better sense, because you’re a little bit afraid of it, you’re going to be using these intraday charts to give you a better sense of what you should be doing; this one very, very micro stuff, and then as you go out you get a different flavor for what the stock is doing. A volatility squeeze, I like, I think this moves higher from here, not right now, maybe not even today, but the way I am looking at this it’s moving higher.
Do the same thing on Priceline ( NASDAQ:PCLN ), “That’s extended I don’t want any part of that.” Start with the hourly chart, that’s pretty steep, no thank you; great to be long, but scary to buy. The15-minute chart, well this is a little different because what has the stock done in the past? In the past, during the day, the stock has squeezed, it’s been in a sideways trading range for much of the day, kind of like it is here, and then what’s it done, it moves higher each time. So this is like a stairway, it’s a stepping stone, a bunch of stepping-stones going up a hill. I’m looking at this, I would be comfortable buying Priceline ( NASDAQ:PCLN ), and I would put my stop about 8.00 or $10.00 below, put it right around 12.20, 12.60, if I’m trading in such a short time frame; otherwise I would just go back to the daily chart and say, “You know what? There’s one reason I’m buying this stock, it’s going up.” Sometimes that’s all it takes.