Should I Buy TSLA Stock? Tips From a Swing Trader
Should I buy TSLA stock?
Its the biggest question right now in the investing world.
This is what happens when a stock soars over 60% within 3 days.
Our parabolic exit strategy was triggered yesterday on a swing trading opportunity we featured to clients on TSLA a week and a half ago before it nearly doubled in price.
So, if you ask me, the answer is “No” for now. We sold it yesterday and I will be waiting for the next ideal technical entry point if it maintains its long-term uptrend.
Swing Trading vs Investing
The reason we bought it for a swing trade is because it formed the most bullish chart pattern, the high tight flag, and then broke out to new highs on a strong catalyst. This lets us trade it with a tight stop-loss, a high win rate with a lot of upside potential on the trade.
The good news for investors is that top growth stocks that break out of this very bullish technical pattern often soar quickly, pull back and consolidate for a few weeks before reaching another good technical entry point and taking another leg higher.
If, that is, the stock is not a penny stock but a top recent IPO or top growth stock like TSLA.
Last year we featured ROKU to clients early in the year in the same extreme technical pattern before it soared over 200%. This bullish pattern and strong breakout often leads to a larger move. However, I personally do not want to buy and hold onto a stock going lower, even over the next few weeks.
Next Question: When Should I Buy TSLA Stock?
So another important question to ask is “when should I buy TSLA stock?”. Of course, this only comes after answering yes to the question of whether you should buy TSLA in the first place.
As a swing trader with more than 10 years experience trading, I personally do not buy and hold a stock that is below the 200 day moving average.
If its below the 200 day moving average, I first wait for the stock to get above that point and then I want to see it tested. So if the market pulls back or if there is some transient bad news for the company or industry, I want to see a successful test of the 200 day moving average or at least find support around that area.
Then we like to see the price break the prior swing high.
In other words, a pullback to the 200 day moving average (any charting software will have this), the price hold at or around that level, and then a strong rebound off that area. In general, for an investment I would need to see at least that.
Stocks below a declining 200 day moving average tend to have declining businesses or are in declining industries. Or both. They also have a lot of investors who bought well above the current price. They have a tendency to sell near break even after being down so far in a position.
Its only human nature to want to get out at break even after you have been down a lot on a stock. So some investors will sell once the price goes back to their entry price.
This selling pressure causes more sharp pullbacks and more volatility. “Volatility” is another way of saying you could be down quite a bit on the position even if it does go higher over time. Or, it could go lower and keep going lower.
Why TSLA Overshot to the Upside from a Technical Analysis Perspective
This is one reason why TSLA made its record 3 day move of 60%+.
Its not because we featured it to clients just before the big breakout.
Its partially due to the fact that the stock was breaking into new highs with no bag holders that got in above the breakout point. Naturally, it was also above a rising 200 day moving average at the same time.
So if you are reading this and TSLA or another favorite growth stock is below a declining 200 day moving average, its a good idea to think twice and ask yourself why? Money talks and large investors often know better to jump onto a sinking ship.
Other Signs to Look for
Another good sign we look for is a series of higher lows and higher highs for the stock for many months, or preferably, years. If we find a strong enough pattern with a consistent support level, we can buy near that support level as the price is starting to trend back higher as long as the fundamentals and outlook are improving.
However, with the stock down 18% today after triggering our exit strategy yesterday, clients using our high tight flag strategy took a big profit within a week and will wait for another good swing trade.
Other stocks, like ALEC over the past couple days, will break out of the same very bullish technical pattern and likely make a nice move for us also. ALEC soared over 20% out of another high tight flag within a couple days. The optimized high tight flag strategy continues to be our top strategy in the current market as long as it meets the requirements in the high tight flag course videos.
Fortunately, there likely will be other good technical entry points on TSLA this year. The next one we are looking for is a 1-2-3 trend change or a bullish candlestick pattern starting off the 50 day moving average. A follow-on buying opportunity used by top growth stock traders and investors.
Our annual New Years sale is now available. This year you get a great deal on the Daily Alert plus a discount on the hottest chart pattern over the past few months – the high tight flag.