Within Range

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Yep, we’re going to talk about Tesla again. Why? Two reasons. One, I’ve found that financial instruments are like people – – you get along well with some, and not-so-well with others. My experiences has shown me I get along with Tesla. I tend to understand it. The second reason is that I believe Tesla’s behavior is enormously influential to the psyche of the entire stock market. Now that we’re past the TSLA earnings report, we can consider this effect, which at the moment is very positive.

Ever since TSLA almost perfectly hit my “just under $100” target on January 6th, it has gone up an amazing 55%. Keep in mind, this is in a matter of just three weeks. What is vital to keep in mind is the stock’s Fibonacci retracement levels.

On the chart below, in green tint, I have highlighted TSLA’s rise from its 23.6% level to its 38.2% level. Please note that the chart, which I took a screenshot of before the market’s opening on Thursday, does NOT include the additional positive bar from the post-earnings rise, which essentially completes the entire trip from one Fib to the next Fib higher.

The path of the entire market for weeks to come, I believe, rests in that blue (well, cyan) tinted area. That is to see, I believe there are two TSLA-driven possibilities at this juncture:

  • DONE: The trip to just under $160, which will represent a nearly 60% rise in just a few weeks, will be the end of the bounce. Now that all the good feelings have been poured into TSLA (in sharp contrast to some very, very bad feelings from early this month) the stock will exhaust itself at its major retracement and, as it starts sinking, bring the animal spirits (and the market) down with it, or…….
  • ANOTHER TRAVERSE: The stock may take a breather around $160 but, as the market in general retains its strength, it will commence the next leg of its redemption and start clawing its way to just above $200.

Below we can see the positive effect TSLA has had on the market (by way of the SPY) since the January 6th bottom. It’s funny, because looking at this SPY chart, the rise seems so modest, but the harm done to equity bears has been epic.

It seems to me this ‘will there be a blue zone or not?” question will be answered within days. As I type this, I am in a deeply pessimistic mood (about myself and my market confidence), so I’m leaning toward TSLA simply gathering more momentum and continuing to drag things higher.

I have no position in TSLA (except obliquely, by way of a family member with a tremendous vested interest in the stock’s success), nor do I intend to have one. That would change if and when the stock managed to get above $200 (which, let’s keep in mind, which represent a 100% price rise in a very short amount of time!)

The literal bottom line: keep a very close eye on TSLA.