Larry’s Note: Tonight, at 8 p.m. ET, I’m coming to you with my Shockwave Summit. There, I’ll explain why I’m expecting rough waters ahead… 2023 promises to bring more choppiness to our portfolios.
And on March 17, a shockwave of volatility is going to hit the market. If you’re prepared, though, it could be one of the best money-making opportunities this year.
So tonight, I’ll share my favorite ticker for the volatility we’re about to face… and explain my strategy for profiting during this shockwave.
To make sure you don’t miss out, please RSVP to attend instantly by going right here.
Tesla (TSLA) felt the full pain of the Big Tech selling last year…
After reaching an all-time high in November 2021, TSLA spent 2022 stuck in a prevailing downtrend.
Even when the broader market found a base in October, TSLA continued to plummet. It lost around two-thirds of its value in the last four months of 2022.
After that brutal sell-off, however, TSLA looked oversold coming into 2023… and ready for a bounce. TSLA then ripped higher, gaining a massive 100% in the space of a month.
But that rally put TSLA into overbought territory. It has drifted lower since… and today, I want to see what’s coming next for this volatile stock…
Breaking Through Resistance
On the chart below, you can see TSLA’s steady downtrend in 2022…
TSLA made lower highs in April (‘A’) and August (‘B’), as well as back in January.
The falling 50-day moving average (MA – blue line) also shows that downtrend. Take a look…
Tesla (TSLA)
Source: eSignal
After topping out at both ‘A’ and ‘B,’ there were two patterns that confirmed TSLA’s downtrend…
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The Relative Strength Index (RSI) formed an inverse ‘V’ (red circle) from overbought territory (upper grey dashed line) and started tracking sharply lower. The RSI then fell through support (green line) and got stuck in the lower half of its band as TSLA’s down move accelerated.
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The 10-day MA (red line) bearishly crossed below the 50-day MA with both then trending down.
TSLA’s downtrend ended only when the RSI formed a ‘V’ in oversold territory (lower grey dashed line) in late December (red arrow).
TSLA’s strong rally then began when the RSI tracked higher toward resistance.
That rally accelerated when the RSI broke firmly into the upper half of its range. And the 10-day MA crossed back above the 50-day MA, which added to the bullish sentiment.
However, the RSI formed an inverse ‘V’ from overbought territory – a repeat of the previous patterns in August and April. And TSLA’s rally petered out at ‘C’…
Tesla (TSLA)
Source: eSignal
Since then, TSLA has continued to drift, and the RSI has tracked lower.
So now, with the RSI testing support once again, what can we expect from here?
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A Broader Downtrend
For TSLA’s rally to resume, we’ll want to see the RSI hold support. The longer it can stay in the upper half of its range, then the stronger any further rally could be.
We’d also want to see the 10-day MA (which has recently been drifting down) turn higher and start to accelerate above the 50-day MA again.
However, right now it all hinges on the RSI…
If the RSI breaks down through support, then this current pullback will gather momentum.
A prolonged stay in the RSI’s lower range could then be the start of another major leg down. That would add further impetus to TSLA’s broader long-term downtrend with it making lower highs (‘A,’ ‘B,’ and ‘C’) and lower lows (in May and January).
And a continuation of this broader trend could then see TSLA take out its January 2023 low.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict
Reader Mailbag
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– Mary H.
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