Tesla (TSLA): "Gone Fishing"… for a High-Confidence Trade Setup
See how a common technical pattern kept traders a-head (…and shoulders) of Tesla’s late October sell-off
by Nico Isaac
Updated: January 22, 2018
The CEO and co-founder of Tesla, Inc. Elon Musk says that in order to be happy, people should "pursue what they're passionate about."
Well, this mantra couldn't be more fitting for our senior market analyst and Trader's Classroom instructor Jeffrey Kennedy. In Jeffrey's own words:
"I love trading. I love teaching. I love technical analysis and, in fact, I spend a great deal of my nights and weekends simply combing through price charts looking for that next great opportunity."
There's just one small hitch -- namely, sometimes Jeffrey's pursuit of that opportunity causes him to "over-trade." In other words, leaping before he's thoroughly looked at a market's price chart in the quest to catch the trend. Here, Jeffrey sets the record straight:
"If you find yourself pushing it, it's okay. Take the day off and go fishing. If you don't want to take a losing trade, you need to understand what a winning trade looks like. You have to disciplined in only trading those setups."
For Jeffrey, the characteristics of a winning trade are simple: No less than two confirming technical indicators. And, an Elliott wave pattern that fully supports those technical measures.
So, now that you know what constitutes a winning trade on paper, let's look at one in real life. Enter our October 25 Trader's Classroom, where Jeffrey checked off every requirement of a high-confidence trade setup in Tesla Motors, Inc. (NASDAQ: TSLA). Namely:
- A bearish candlestick pattern known as "three black crows"
- A negative momentum signature
- And a clear head-and-shoulders technical formation, pictured below
All three technical indicators, along with a strong Elliott wave interpretation, pointed prices in one direction: "easily down into the 300 area."Here, we have a clip of the October 25 Trader's Classroom episode in which you can hear Jeffrey walk traders through his analysis. Simply press play and enjoy!
The next chart shows where Jeffrey's bearish outlook occurred along Tesla's late-October sell-off to 5-month lows.
Again, here is the mega-genius co-founder of Tesla, Elon Musk: "If you want to grow a giant redwood, you have to make sure the seeds are okay."
For Jeffrey Kennedy, a similar sentiment applies: If you want to a high-confidence trade setup, you have to make sure the criteria of a winning trade are there.