Today, Wall Street Memes looks at Tesla stock (TSLA) – Get Free Report from a technical perspective: what do the charts tell us about owning shares here?
But before we dive in, keep in mind that CPI data for the month will be released in a couple of hours, and the inflation print is noteworthy to consider in your analysis.
The Consumer Price Index is an indicator of change in the price of consumer goods and services, and it is the most used indicator of overall inflation in the economy. Traders and investors pay close attention to CPI data releases.
Let’s analyze the chart for TSLA and determine the possible future price direction. For a comprehensive overview, I’ll run a top-down analysis of the TSLA chart.
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TSLA: The Trend Is Your Friend
The above image is a TSLA daily timeframe chart. The weekly and daily timeframes are clearly indicating that the price is on a downtrend. As the famous saying goes, “the trend is your friend.” So, no matter what our speculative takes might be, our overall bias should be in the direction of the trend.
While identifying the market direction on weekly and daily timeframes is essential, our point of interest is where the price is now.
So, let’s zoom in and see what TSLA is up to.
The share price is presently resting on a support zone at 118.63, after being rejected from the 123.25 resistance level. TSLA is currently ranging between these two key levels on the daily time frame.
How do we decide from here if TSLA will follow a bullish or bearish pattern for the foreseeable future? The simple answer is we do not. This is because we don’t predict price movement, we simply react to it.
We will wait for the price on the daily time frame to break and close above 123.25 or below 118.63. Waiting for the daily candle to close below support or above resistance gives us that extra confidence and confirmation to take the best trades possible.
Follow The Trend In TSLA: Is That Really All?
Of course, we can’t simply stop at the stock price trend. To find good trade setups, we scale down to lower time frames, like the 4- and 1-hour time frames on TSLA.
While we could expect the price to plummet to 101.81 if there is a break and closure of a daily candle below the 118.63 support, we can’t ignore the possibility of a potential inverse head and shoulder structure on the H4 time frame, as seen in the image above.
If this happens, a buy trade could be taken at the formation of the second shoulder, or after the break and reset of the neckline for the higher probability trade.
This is the classical outcome we will expect in the event of a breakout and closure above the daily support or resistance.
To take trade entries on this setup, one might want to scale down to lower timeframes like the 30 and 15 minutes to get a nice risk-reward ratio.
From Wall Street Memes, we wish you a happy trading year ahead. See you on the profit side!
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)