Today we learned a valuable lesson on how traders can make a ton of money in the stock market with hard work and preparation. I will go over a few examples below and share some techniques I like to have at my disposal when looking for those really short term trades with decent risk/reward.
The first illustration (figure 1) is what I call the monthly price map. It shows every daily movement for a specific ticker for every trading day. For this write up we are exploring $TSLA for every mention and data point. For those are mobile, you will have to zoom in to really visualize the data below. It’s a ton of information but I will try and summarize it here and explain how it could have been used. Since inception, May 8th has proven over the years to be a pivot point for this stock for whatever reason. It’s usually when the stock starts to bottom and start it’s next leg higher. This is shown in figure 2. You will see on all time frames (inception and 3 year) the sum of all averages have led to a bottoming process on May 8th. Figure 3 shows that the next leg higher could also very well start now since we are getting our bounce on May 9th. History does not always repeat but people have habits and people are the ones buying stock. You also have the model 3 production start but I’ll leave the why up to the pundits on television and try to find my edge in the data and numbers.
So what we have learned so far is that May 8th was a good time to buy this stock and today its currently up $13 or 4%. So while it could be completely unrelated, profits don’t require reason.
Level 2 of the JXM database is showing this name is just warming. You have a lot of positive indicators showing buy signals plus this carries an impressive rank of #2 from a very strong screener of 24 companies (not shown) which were also all in uptrends. Without boring you with the details, its a beast and the beast hasn’t even shown its teeth yet.
Before I buy something I like to have an alignment of reasons that tend to all agree with each because I work very hard for my money and while I really enjoy money, my wife likes it much more than I do. So with that said, I still need more data to put on a position. Below I have the 60 min candle chart along with the weekly. I am showing both for specific reasons that I will try and explain now. First up is the 60 min, if you look closely the blue line is the start of May and the stock bottomed on heavy volume around May 4th after its earnings report. The known catalyst is now out of the way and the trade volatility is much safer. IMO the short sellers have started to cover up some and this is why we could be on our way to retest those highs.
Lastly is the weekly view and this is where it gets very excited for those who did any homework over the weekend. Last week created a very large tail off previous support of $292. This was the high for almost 3 years and a lot of eyes were watching to see if this would have a successful back test. Based on the chart below, it did and buyers stepped in last week around $290 and this thing hasn’t looked back since. The long tail on the candle chart below shows that price closed over support and had a ton of demand between $290-292. Volume was also impressive so one could easily consider that a trading low (a number I would trade against, consider a stop)
To summarize some of the above, the daily price map showed patterns of historical buying after May 8th. When you combine that interesting fact with a level 2 JXM score of over 70% which is still in the warming phase along with established weekly support you really have a strong combination or what many refer to as solid risk / reward.