Tesla (TSLA) Top-Down Analysis – 14 December 2021

  • TSLA.us
    (${instrument.percentChange}%)

Introduction

According to filings with the SEC that were published on Monday, Tesla CEO Elon Musk sold 934,091 shares of the company. The value is near $906m. He also exercised options at a strike of $6.24, purchasing 2.13m shares. According to the filings, the transactions were part of a Rule 10b5-1 trading plan, dated 14 September. This is in addition to his previous sales earlier in the month of two batches totaling $963m and $1bn each. Musk did disclose at the 2021 Code Conference, 28 September, that he would sell stock in Q4. His Twitter poll of 6 November also asked if there was support for his selling of shares. There were 3.5m respondents and ended with 57.9% voting "Yes."

Weekly Chart

Despite how one interprets the sales, last week's price action may prove to be important in terms of TSLA's primary trend. It effectively charted a lower trough after a lower peak, the classical definition of a downtrend. This comes after an overbought reading for the week ending 29 October (blue dashed vertical). The weekly stochastic has also slipped below 80, as previous positive momentum waned.


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Daily Chart

It took TSLA eighteen days to move from its area of strength to its area of weakness, between the lower blue and lower red bands. This chart below uses heiken ashi candles which are trend-following indicators. Of concern, the heiken ashi candles are red in the area of weakness. We also note that the Bollinger bands have squeezed (dashed blue rectangle). This indicates lower volatility and usually foreshadows a sharp increase in volatility. Clearly, a situation of volatility expansion whilst the heiken ashi candles are red and in the area of weakness will be considered bearish for the stock.

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Hourly Chart

In terms of the short-term chart, the longer the stochastic maintains its position near its lower quintile, there is likely to be pressure on the price. If the EMAs cross positively, and if the stochastic makes its way to 80 and holds, market participants may be looking to "buy the dip." However, given the weak higher timeframes, this may prove to be a challenge.


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Featured Image by Blomst from Pixabay

Reference:
cnbc.com

Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

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