Finding A TSLA Fade

Price and volume.  Those were the clues that allowed for a well timed entry into TSLA after it had fallen from the 181.43 high on 11/5/13 to 132.32 3 trading days later.

With TSLA’s history there was the possibility that the first day selloff even on good volume and taking out the swing lows of 153 would be an anomaly and price would snap back.

Not this time.

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With the continuation it was just a matter of watching for selling pressure to fade.

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The thing to notice is selling volume shrinking on the 7th and 8th, followed by the first buy volume being greater than the selling volume.

Watching the price action on a smaller time frame Friday (5/15 min) the consolidation on the lows is something I’ve seen many times before – it’s bearish.
So I have conflicting info on the hourly with selling volume shrinking but the latest development in bearish.  Ahhh trading – having to deal with conflicting information.
So always trying to think in terms of risk you have to be wary of a new fresh wave of massive selling that undoes the prior development.
Long story short the pattern kept me from getting aggressive on the long side, but the rest of the picture leaves me nibbling / positioning the long side trade.

The selling came in but was overruled per say by some combination of weak selling and responsive buyers.  The PA the rest of the day had me comfortable holding vertical call spreads into the following week.

5 min chart of the buyers showing themselves

2013.11.12[09.41.58]_TSLA - ProphetCharts®

I positioned myself for the snapback trade buying lower strike spreads on the dip below 134 given the evidence of weakening selling + experience seeing moves become overextended.  After the failed selloff below 133 I bought common stock (avg px $136.7)

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The strategy was to trade around the common and hold the options until price went above 141 and begin scaling out of my call options.  The reason for being quick to exit the spreads is that I only have until Friday and this is the first bounce of a momo stock that is being hammered for the first time.  It could consolidate and end up pushing lower and I don’t want to be left holding worthless spreads.  I closed the trade out yesterday for a 1.68% gain on about 1% risk (depending on if I consider letting the options expire worthless if TSLA had open down at $110 on Monday or some disaster scenario).

Watching TSLA today + understanding how price behaves in situations like this I’m watching to see the
A) retest of the lows / behavior at lows
B) possible resurgence to 150 before really retreating back to the lows.

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