When the stock market is hobbling along, trying to determine whether the recent jobs and manufacturing data are good or bad for the economy, it’s easy to miss some of the stocks that could make intermediate-term profitable returns.

One stock that has shown strong technical strength in the last couple of days is Tesla, Inc. (TSLA). I noticed TSLA stock entered the StockCharts Technical Rank (SCTR) Reports top 5 in the Large Cap, Top Up category. When an actively-traded stock like TSLA pulls back almost 30% and shows signs of recovery, it’s time to pay attention.

FIGURE 1. DAILY SCTR REPORTS SHOW TSLA IN THE TOP 5 OF THE TOP-UP, LARGE-CAP STOCKS.Image source: StockCharts.com. For educational purposes.

Tesla Stock Analysis

While the rise in Tesla’s stock price can be attributed to news of the company launching self-driving assistance software, it’s worth analyzing TSLA stock from a technical perspective. If there’s enough momentum behind the stock price rise, it could make for a profitable intermediate-term trade.

We’ll start with an analysis of the weekly chart of TSLA (see below).

FIGURE 2. TSLA STOCK ANALYSIS ON A WEEKLY CHART. TSLA is trading between its 50- and 200-week moving average. Its RSI is rising gradually, as is its relative performance against the S&P 500.Chart source: StockChartsACP. For educational purposes.

TSLA is trading between its 50- and 200-week simple moving averages (SMA). Both SMAs indicate that the weekly trend in TSLA stock is relatively flat. However, the SCTR score is rising, and the relative strength index (RSI) is displaying a gentle upward slope. The relative strength of TSLA with respect to the S&P 500 ($SPX) has been weakening. If the line breaks above the downward-sloping red-dashed trendline (see bottom panel), from a weekly perspective, the stock could rise further. TSLA’s stock price was in the $400 area before its decline.

Is it worth buying the stock now? Let’s analyze Tesla’s daily price action (see below).

FIGURE 3. DAILY CHART ANALYSIS OF TSLA STOCK PRICE. Tesla’s stock price is still above its August 20 high, but momentum needs to be stronger. Look for MACD to start moving higher.Chart source: StockChartsACP. For educational purposes.

The following are some points to note:

TSLA is trading above its 21-day exponential moving average and 50-day SMA.The short-term uptrend from the August low is still valid.The Chaikin Money Flow (CMF) indicator is in positive territory, which suggests that there is more buying than selling pressure.The Moving Average Convergence/Divergence (MACD) oscillator displays relatively weak momentum.

When Should You Buy TSLA?

Since TSLA’s stock price is news-related, it’s best to thoroughly analyze the chart before deciding when to enter a long position. The following are a few points to consider:

Can TSLA take out its August 20 high? If it does, then you have signs of an uptrend (higher highs and higher lows). If not, look to see where the stock price establishes its next low. If it goes below the upward trendline, then the uptrend condition is violated.Although the CMF shows more buying pressure, it’ll have to move higher to levels similar to the jump from July 1 to July 10.The MACD must cross into positive territory and move higher, like in July.Last, but not least, the SCTR score needs to remain above 70.

When Should You Exit TSLA?

Let’s assume the upward trend continues with strong volume and momentum. If you were to open a long position above $228 (August high), then, on your chart, use the Annotations tool to add Fibonacci Retracement levels from a recent low and high. Use these levels to help determine entry and exit points.

The bottom line. Add the daily and weekly charts of TSLA to one of your StockCharts ChartLists. Watch the price action and determine if it’s worth entering a trade. Before entering the trade, know how much you’re willing to lose on the trade and set your stop loss levels and profit targets. Set StockCharts Alerts to notify you when specific price levels are hit. You never want to marry a stock. It’s a numbers game.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

In this exclusive StockCharts TV video, Joe shares how he identifies and trades a reversal pattern. Highlighting what causes him to focus in on a stock, he shares the 1-2-3 reversal pattern, along with the keys in MACD and ADX that allow you to improve the risk/reward equation in your trade. Joe also answers a viewer’s question on how rotation takes place. Finally, he goes through the symbol requests that came through this week, including MCD, NVDA, and more.

This video was originally published on September 4, 2024. Click this link to watch on StockCharts TV.

Archived videos from Joe are available at this link. Send symbol requests to stocktalk@stockcharts.com; you can also submit a request in the comments section below the video on YouTube. Symbol Requests can be sent in throughout the week prior to the next show.

As we have discussed many times, financial markets are fractal. Different timeframes produce similar price structures. This is a very valuable phenomena for the study and practice of trading. When tracking the intraday time frame; Wyckoff structures of Accumulation, Markup, Distribution and Markdown repeat over and over. This creates a laboratory for study and analysis. Below is just such a case study. By paying attention to the intraday charts, the Wyckoffian often identifies setups brewing in the larger timeframes. The market’s intention in the larger picture is often first revealed in the intraday.

S&P 500 Index, Intraday 30-Minute Timeframe

Chart Notes

1.      The upward stride of the $SPX (30-minute timeframe) accelerated into Preliminary Supply (PSY) creating a local climactic event.

2.      The continuation of momentum carried the index into a Buying Climax (BC). Note the poor quality of the rally from the PSY to the BC. Supply is present!

3.      The Automatic Reaction was sudden and deep with expanding volume. Large sellers were present and motivated to reduce their holdings.

4.      The BC is critical Resistance and the AR is Support in the newly formed range-bound structure.

5.      A Cause was being built from the PSY to the Last Point of Supply (LPSY) that had the character of Distribution. Volatility on weakness to the Support line tipped off the presence of active selling and supply. Volume expanded during the second half of the Distribution structure. More Supply, Supply, Supply!

6.      A Last Point of Supply (LPSY) completed the Distribution which was confirmed by the immediate gap reversal and expanding spread on the return to the Support line. This volatility supported the conclusion that Distribution was complete and Markdown was the next phase. The decline below Support confirmed Markdown in progress.

7.      Downtrends, even small versions, are typically volatile with large up and down swings. They are ideal for study purposes, while only the most accomplished traders should consider campaigning them.

S&P 500 Index, 1-Box Method, 15 Minute Data, ATR Scale (12.51 pts)Distribution is a Cause building process for the next trending move of the index, which is expected to be downward. A 15-minute Point & Figure chart with ATR Scaling is used to estimate the potential for the extent of the subsequent decline. With this 1-Box reversal PnF chart we identifed two count segments. Counting from right to left the count was taken from the Last Point of Supply (LPSY) to the Buying Climax (BC) and to the Preliminary Supply (PSY). Two count estimates were generated: 5,366.75 and 5,291.73.

Chart Notes

1.      Using the vertical chart of the Distribution and the chart analysis and then identifying those points on the PnF, two counts were taken. The lower objective estimate suggested that the decline could take back the rally from August 14th to the BC high on August 22nd. So, volatility could ensue as there is little natural support to those lower objective levels.

2.      Volume was quite high into the PSY and the BC, which indicated active selling on a scale up by the Composite Operator (C.O.) community. Thereafter, C.O. selling was persistent at the 5,642.01 Resistance level. Note that volume expanded throughout the second half of the Distribution. This further confirmed the Distribution hypothesis.

3.      Supply engulfed the index as it fell out of the Distribution, and this can be seen in the very high downside volume. A rally into the underside of the prior Support zone is possible. Selling would be expected to continue from under the old Support zone.

4.      How, and if, the index approaches the PnF price objectives will tell much about the subsequent intention of the $SPX index. The stock market is always an unfolding picture.

This intraday structure is a Tempest in a Teapot for its small size in time and potential extent of the move. This is valuable training and good practice for a Wyckoffian. Please take the time to zoom out to the larger daily and weekly charts to study the greater picture. As they are fractal, your practice will speed the learning curve. And your path to mastery.

All the Best,

Bruce

@rdwyckoff  

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. 

Wyckoff Resources:

Distribution Definitions (Click Here)

Wyckoff Power Charting. Let’s Review (Click Here)

Additional Wyckoff Resources (Click Here)

Wyckoff Market Discussion (Click Here)

Event Announcement:

TSAA-SF Annual Conference (to learn more CLICK HERE)

Old School / New School.

Conference Themes will range from Artificial Intelligence to Reminiscences of a Stock Operator.

In-person in San Francisco and Livestreaming for dues paying members.

Saturday September 14th at Golden Gate University

The TSAA-SF annual conference will be held on Saturday Sept 14th 2024 at Golden Gate University. It is an all day hybrid event, held both in person and via zoom. This year’s speakers include:

 * John Bollinger, CFA, CMT – Creator of Bollinger Bands, Author, Investor

 * Linda Raschke – Author of “Trading Sardines” Trader/Investor

 * Damon Pavlatos – CEO of Future Path Trading LLC & PhotonTrader

 * Dave Landry – Trader, Author, Speaker, Educator, Founder of DaveLandry.com

 * Robert Schott – Expert in Global Investments, Strategy, Risk, Derivatives, & ALM

 * Patrick Dunawila, CMT – Technical Analyst, Co-Founder of The Chart Report

 * Mike Jones – Data Engineer & Analytics Consultant

In early 2024, MicroStrategy (MSTR) became a meme stock favorite thanks to its close ties to Bitcoin. If you rode the hype to its peak in March, hopefully you cashed out before hedge funds began shorting it heavily and going long Bitcoin instead.

How would you have known that hedge funds would begin plunging the stock? Like most traders, you probably wouldn’t have direct access to this type of information before it’s too late. But you’d have indirect information from institutional investors’ “footprints” in the market.

Tracing the Impact of Hedge Fund Shorting in MSTR

Pull up your SharpCharts platform, type MSTR in the symbol box, and look at its price action in March. It peaked at $200 a share, which is when hedge funds began shorting the stock.

In the Overlays section below the price chart, add the 200-day simple moving average (SMA). Even though MSTR’s intermediate-term trend is down, its long-term trend is still up, yet it’s currently being challenged.

Clues That Smack of Heavy Short Selling

Here’s what I’m looking at—my complete chart (which you can follow or customize yourself by clicking on this link).

DAILY CHART OF MSTR STOCK. The footprints of hedge fund activity were evident in the divergence between price and momentum.Chart source: StockCharts.com. For educational purposes.

Look at the blue lines in the lower panels that follow the contours of the price action, Relative Strength Index (RSI), and the Chaikin Money Flow (CMF). You may not have had knowledge of hedge fund shorting activity, but the traces of their actions are evident in the divergence between price action and momentum.

The jump from $49 to $200 in just over a month screams meme momentum. But what momentum? The RSI tells you that those three consecutive higher swing points from the end of February to the March peak are overbought, with momentum dropping off. The CMF also shows that buying pressure is declining as the price keeps moving higher.

The Ichimoku Cloud is plotted to measure the intermediate-term trend and momentum. As you can see, the first bounce after the March decline (see orange circle) was met with buying at the 61.8% Fibonacci Retracement line. The second and third took place at the 200-day SMA.

Despite the volatility, the intermediate trend is sideways, and the momentum is flat. For the long-term uptrend to hold, the price needs to stay above the 200-day SMA—and that’s being tested.

Closing Bell

Here’s the takeaway: Some fundamental developments aren’t always easy to spot. Most investors wouldn’t have caught certain hedge funds’ short-selling moves in MSTR stock. That’s where technical indicators save the day. In this case, it was all about divergence. You can also rely on other indicators to catch trends before they’re obvious. Use the StockCharts tools listed in the Member Tools section of Your Dashboard to stay ahead with timely, actionable insights.

Last but not least, be sure to save MSTR in one of your StockCharts ChartLists.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

I hope you had a relaxing, restful long weekend, and welcome to September.

It was a pretty dismal post-Labor Day trading session. We all know September is the worst for stocks, but let’s hope the first day’s action doesn’t foretell how the rest of it will play out. All the broader equity indexes are down, with the Nasdaq taking the biggest hit. The Nasdaq Composite ($COMPQ) and Nasdaq 100 Index ($NDX) closed lower by over 3%.

The StockCharts MarketCarpet was a sea of red, with technology stocks leading down. Some pockets of strength can be seen in Consumer Staples, Real Estate, and Utilities, the leading sectors in Tuesday’s trading.

FIGURE 1. A SEA OF RED. The StockCharts MarketCarpet gives you a good idea of stock market action.Image source: StockCharts.com. For educational purposes.

Tuesday’s Manufacturing PMI was 47.2%, which is lower than expected. This suggests that manufacturing activity is contracting, which may have been the catalyst that led to the stock market selloff.

The daily chart of the S&P 500 ($SPX) below shows the index hit its 50-day simple moving average (SMA) and bounced off it. But what’s less discouraging is that it closed below its 21-day exponential moving average (EMA) and a consolidation range.

FIGURE 2. THE S&P 500 BREAKS BELOW ITS CONSOLIDATION RANGE. If momentum continues to slow, there could be more selling pressure in the near-term.Chart source: StockCharts.com. For educational purposes.

Overall, the pullback is still well above its August low, so, technically, Tuesday’s selloff isn’t as bad as it may seem. But it’s not all that great, either. The full stochastic oscillator in the lower panel shows declining momentum, so there’s a chance that the chart could get ugly.

Techs Tank

The Nasdaq Composite chart looks even worse. The index is flirting with its 100-day SMA and is below the 38.2% Fibonacci retracement level. The stochastic oscillator is also declining much steeper than for the S&P 500.

FIGURE 3. TECH STOCKS TANK. The Nasdaq Composite is flirting with the support of its 100-day moving average. The stochastic oscillator in the lower panel is in a steep decline.Chart source: StockCharts.com. For educational purposes.

The selling frenzy in Tech stocks isn’t new, especially in semiconductor stocks. Nvidia’s earnings weren’t good enough for the market, and Broadcom, Inc. (AVGO) will announce its earnings on Thursday. AVGO stock closed lower by over 6%, and NVDA closed over 9% lower. If Broadcom doesn’t report strong enough earnings, there could be more of a selloff in the Technology sector.

Of course, time will tell, but it’s worth watching the CBOE Volatility Index ($VIX), which rose 38.13%. That may seem high, but it’s not as high as the August 5 spike.

FIGURE 4. THE FEAR INDEX ($VIX) ROSE OVER 38% ON TUESDAY. A spiking VIX is something to watch since it indicates fear among investors, which means further selling could occur.Chart source: StockCharts.com. For educational purposes.

When the VIX starts spiking, it indicates nervousness is in the air. If a rising VIX keeps you up at night, it may be better to take some profits, especially in your most profitable positions. There’s a chance that investors may rotate out of mega-cap tech stocks and into other sectors such as Financials, Utilities, and Health Care.

But today’s market action isn’t showing strength anywhere. Precious metals, oil prices, and cryptocurrencies all fell. The only area that showed strength was the US dollar and bond prices, the latter due to a fall in Treasury yields.

Closing Position

There’s a chance the market could digest today’s Manufacturing PMI data and recover, but there are two factors that warrant cautious trading—a rising VIX and September’s seasonal weakness. Earnings from Broadcom, Inc. and Friday’s Non-Farm Payroll data will be critical variables.

Links to Charts in This Article

Daily chart of S&P 500.Daily chart of Nasdaq Composite.Daily chart of $VIX.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

In this video from StockCharts TV, Julius evaluates the completed monthly charts for August, noting the strength of defensive sectors. He then analyzes a monthly RRG and seeks alignment for the observations from the price charts. Could “sideways” be the most positive scenario for the S&P 500 these next few weeks?

This video was originally published on September 3, 2024. Click anywhere on the icon above to view on our dedicated page for Julius.

Past episodes of Julius’ shows can be found here.

#StayAlert, -Julius

Good morning and welcome to this week’s Flight Path. Equities consolidated their new “Go” trend this week. We see that the indicator painted mostly strong blue bars even as price moved mostly sideways. Treasury bond prices remained in a “Go” trend but painted an entire week of weaker aqua bars. U.S. commodity index fell back into a “NoGo” after we had seen a few amber “Go Fish” bars and ended the week painting strong purple bars. The dollar, which had been showing “NoGo” strength ended the week painting weaker pink bars.

$SPY Consolidates in “Go” Trend

The GoNoGo chart below shows that after entering a new “Go” trend just over a week ago, price has consolidated and moved mostly sideways. GoNoGo Trend has been able to paint “Go” bars with a sprinkling of weaker aqua in the mix. The end of the week saw strong blue bars return and price toward the top of the range. GoNoGo Oscillator is in positive territory at a value of 3. With momentum on the side of the “Go” trend and not yet overbought, we will watch to see if price can challenge for new highs this week.

The longer time frame chart shows that the trend returned to strength over the last few weeks. Last week we saw a strong blue “Go” bar with price closing at the top of the weekly range, close to where it opened. Some might call this a dragonfly doji, having slightly bullish implications. Since finding support at the zero level, GoNoGo Oscillator has continued to climb into positive territory now at a value of 3. Momentum is firmly on the side of the “Go” trend. We will look for price to make an attempt at a new high in the coming weeks.

Treasury Yields Paint Weaker “NoGo” Trend

Treasury bond yields remained in a “NoGo” trend this week but the GoNoGo Trend indicator painted a string of weaker pink bars. We can see this happened after an inability to set a new lower low. GoNoGo Oscillator is riding the zero line as a Max GoNoGo Squeeze is in place. It will be important to note the direction of the Squeeze break to determine the next direction for yields.

The Dollar’s “NoGo” Weakens

After a strong lower low we see the dollar rallied into the end of the week and GoNoGo Trend painted weaker pink “NoGo” bars. GoNoGo Oscillator has risen sharply to test the zero line from below and we see heavy volume at these levels. We will watch to see if the Oscillator finds resistance at the zero line and if it gets turned away back into negative territory we will expect NoGo Trend Continuation.

Extended trends often start with big bangs and major breakouts. Chartists can identify “big bang” moves by showing price change in ATR terms. We can use the price charts to identify big breakouts. Today’s example will show Paypal (PYPL), which is part the FinTech ETF (FINX). The ChartTrader weekly report featured FINX because it broke its July high and Paypal because it is part of this strong group. Note that we are offering a free look at this week’s ChartTrader report and video (here)

Let’s first look at the breakout on the price chart. PYPL was trading above 300 in 2021 and then fell to around 50 in October 2024. The stock rebounded with the market from November to January and then traded flat the last seven months. A large range formed with the stock hitting resistance at 68 at least four times since January. The stock broke through with a big move in August and this is very bullish.

Not only did PYPL break a major resistance level, but it did so with a big bang. The indicator window shows Normalized ROC, which measures the price move in ATR terms. Average True Range (ATR) is a volatility indicator developed by Welles Wilder. Normalized ROC (20,250) shows the 20 day price change divided by ATR(250). This indicator exceeded 5 in late August, which means the price move was more than 5 ATR values. A big bang indeed. This is the strongest 20-day move since 2021. Normalized ROC is part of the TIP Indicator Edge plugin for StockCharts ACP.

Even though the big bang move and a breakout are long-term bullish, note that Paypal is short-term overbought after this sharp advance. This means we could see some backing and filling as the stock digest the advance. The green shading marks an area to watch for possible support should we see a pullback.

Note that we are offering a free look at this week’s ChartTrader report and video (here)

//////////////////////////////////////////////////

We had a sneak preview of emerging leadership on the morning of July 12th. That was the morning the June Core CPI came in well below expectations. The immediate rotation into several areas was quite evident and you can see it right here on this RRG Chart:

Financials (XLF), industrials (XLI), small caps (IWM), mid caps (MDY), and transports ($TRAN) were all poised to benefit from a change in Fed policy and the beginning of rate cuts. But Fed Chief Powell announced, and botched the announcement, in my opinion, with no rate cut and mentioning that a potential rate cut would be “on the table” for September. Now, I say “botched”, because the FOMC minutes came out two weeks later and the minutes suggested an upcoming rate cut was likely. “Likely” and “on the table” are not the same to me, but maybe others interpret it differently. Anyhow, that Fed announcement reversed the strength that we had seen in the groups mentioned earlier in July. Here’s how that RRG looked after the Fed announcement and leading up to Powell’s Jackson Hole address:

Does that not look like the exact opposite of what the market was looking at after the June CPI report was released?

Then comes the Jackson Hole speech on Friday, August 23rd, where Powell said, “it’s time for Fed policy to change”, or something to that effect. For 3 years, the Fed has been looking for proof that the decline in the annual Core CPI rate was “sustainable”. Did something happen between July 31st (Fed policy statement) and August 23rd (Jackson Hole speech) that suddenly made the Fed more comfortable of that sustainability? Was it the July CPI that showed inflation met expectations for that month? The only thing he’s proven to me, especially over the past 7 weeks or so is that the Fed changes directions more than a chameleon changes colors.

So now let’s use the RRG to track rotation once again, this time the 6 days since the Jackson Hole speech on August 23rd:

Here we go again! Now we’re beginning to see a repeat of what we saw in the middle of July as technology (XLK) and semiconductors ($DJUSSC) roll over on a relative basis, allowing the XLF, XLI, IWM, MDY, and $TRAN to lead the way.

Keep an eye on this rotation in upcoming days, weeks, and even months, because it’s exactly what I would expect to happen during a rate-cutting environment.

I look much deeper into this rotation, discussing the major indices, sectors, industry groups, and a few individual stocks in my Weekly Market Recap on YouTube, “Which Stocks Are Leading The Market”. Simply click on this link and enjoy!

Also, in my EB Digest newsletter on Monday, I’ll be featuring a now-leading stock that I believe could soar between now and year end. You can CLICK HERE to sign up for our FREE EB Digest newsletter and gain access to this stock on Monday!

Have a great long Labor Day weekend and Happy Trading!

Tom