The safety of Tesla's autopilot driver assistance system was questioned last weekend after one of its S models was involved in a fatal accident in Texas on Saturday night, killing two people. According to reports, witnesses indicated "no one was in the driver's seat" of the vehicle when it crashed into a tree.
An investigation is underway into the cause of the crash, but a local law enforcement officer was quoted by The Wall Street Journal as saying, "We are almost 99.9% certain," no one was behind the wheel at the time. of the accident.
That sent Tesla (NASDAQ 🙂 shares lower yesterday. It was the stock's worst daily sell-off in nearly four months. Intraday the stock fell by as much as 6.5%, but at close the losses had halved to 3.4%.
Tesla & # 39; s highly visible and notoriously outspoken founder and CEO Elon Musk did not silence any of the recent events. On Sunday, he tweeted, "Tesla with Autopilot enabled is now approaching 10 times lower risk of an accident than an average vehicle."
It was followed Monday by another tweet from Musk: "Datalogs recovered so far show Autopilot was not turned on." Texas police say they have not yet received any data log information from Tesla.
Most remarkable to us, from a market perspective, is that despite the devastating news, stocks rebounded from yesterday's low in the course of the day before the close. In addition, the daily low was supported. In addition, the rest of the chart shows that the supply-demand ratio is still tilted towards buyers. As such, we continue to maintain our optimistic position towards TSLA.
The daily low found support precisely through the extended neckline of an H&S top completed on February 22nd. That same support, once broken, turned into resistance and realigned with a second neckline, but this time from H&S bottoms.
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That made sense after an earlier inscrutable rally of nearly 120% in just 12 weeks, between November 16 and January 8, when it was high time to take profits. Reflation trading, which favored value over growth stocks, spurred traders into a race to see who could capture profits faster before prices fell further, creating a self-fulfilling cycle. As a result, the V&G summit declined, because there was insufficient demand but too much supply. As such, the pattern was unable to create a strong right shoulder.
Conversely, in the H&S bottom, the same tapered neckline is a sign of strength as it indicates that buyers soaked up all the supply available and eagerly demanded more, pushing prices up before they could form a proper right shoulder. In economics, as in nature, the pendulum swings back with the same force it initially used. As the sale was driven by panic, demand on the way back was equally determined – in line with the same neckline.
Note, however, that part of the decline predated yesterday's dive. It was a technical correction within TSLA's brand new upward channel from the bottom after it approached the uptrend line since the March bottom boosted by the 200 DMA.
Yesterday's drop rebounded above both the 50 and 100 DMAs, although the 100 DMA fell below the 50 DMA, which is bearish itself. However, that is understandable given the drop, which is seen within the rising channel as a return move to retest the pattern.
Despite yesterday's sell-off, the price formed a hammer, the bullishness of which is exacerbated by standing both on the extended neckline and on top of an earlier bullish flag.
A comparison between different price averages via both the MACD and the RSI were both within bullish formations.
To clarify: we break the technical map to try to solve the puzzle of supply and demand. We don't know the & # 39; why & # 39; behind these price patterns, prompting investors to increase demand over supply from a technical perspective, but we do know the likely results on a statistical basis. Furthermore, we cannot say whether the activity is driven by insider information, informed money, smart money or mere speculation.
However, we know that these patterns follow statistically. That doesn't mean they will work this time.
Moreover, from a fundamental perspective, we cannot know at this point what the surveys will reveal, or whether a broader sell-off in the technology sector following yesterday's bearish pattern will lead to another sell-off. Hence, as always, traders must operate on a trading plan.
Trading Strategies – Long Position Setup
Conservative traders must either wait for the price to be retested. the channel at the bottom or completing its current flag, with the rebound at least 3% deep and lasting at least 3 days, preferably including a weekend.
Moderate traders would also wait for the conservative choice, but would be satisfied with a price penetration of only 2% over a period of 2 days.
Aggressive traders could buy at will, provided they accept the higher risk associated with the higher reward of being ahead of the market. Money management is crucial.
Here's an example:
Trade Sample
Entry: $ 715
Stop Loss: $ 690
Risk: $ 25
Goal: $ 790
Reward: $ 75
Risk: Reward Ratio: 1: 3
