I received a call from a colleague who is not of the “technical analysis” set. He, like most in business, have only a very limited understanding when it comes to looking at market charts. i.e., They only understand UP or Down.
As I have said since the beginning of this blog (and partly the reasoning for it) in today’s world of interconnected markets of all types – not understanding them, in at least a very familiar way with how they interact – is no longer an option for today’s business person. It’s now a requisite and has nothing to do with “investing” per se. It’s about understanding what may, or may not, put your business at risk, or help it grow. 401K type enthusiasm is for others.
So with that said, the question they asked was, “Could I show what I meant when it comes to that ‘False positive’ thingy and the ‘no man’s land’ warning in another example?” For they weren’t quite getting it. I said sure, and started to peruse a few ticker symbols, scanning for something quick to use, and I found one. It’s Tesla™.
For brevity’s sake, I’m not going to go into the minutia of differing time frames and patterns. The example itself should show precisely what I mean. To wit:
The above, is again, a “Mean Reversion Channel.”
Tesla’s stock has been on an absolute tear off its most recent larger pull back. The news regarding Tesla, one would think, would warrant people to either sell, or at least pause in taking it toward its all-time-highs. Auto pilot crashes, investigations, spontaneous ignition, deaths, and more have done absolutely nothing in regards to stopping its upward progression. At just about every instance where it seemed that the “party may be over” signaled – the stock seemed to just gather even more momentum to head upwards.
Today, as I am writing, this stock has fallen by some 6% since the “markets” opening. That type of drop is nothing to sneeze at, especially if you are someone who bought into it on let’s say, Friday.
As you can see I have annotated the above chart, the time intervals represented by the bars/candles are hourly, the same as I used for the Russell earlier.
Today’s price action looks quite dramatic compared to any recent pull backs, and in previous smaller technical patterns and observations it would warrant possible impending turmoil. However, just like the Russel from my earlier post, the smaller patterns have been negated and what seems to have emerged is a much larger pattern which allows for quite the price moves – yet – doesn’t resolve to warn for more down or up. The “ping-pong” effect in the “No man’s land” area between the upper and lower is in effect. i.e., You just have to wait and see a clear break first ether way before any further action is warranted.
I’ll only end with this: If you are one that bought on Friday?
I would suggest you watch very carefully.
© 2018 Mark St.Cyr