Dissecting a stubborn index and $TSLA’s magical level

By Jani Ziedins | Weekly Analysis

Mar 26

Free Weekly Analysis: 

The slow grind higher continues and the S&P 500 notched another record closing high on Friday.

The index exceeded the old highs by an almost imperceptible 0.42 points (0.01%), but a beat is a beat. Especially given the headline environment we have been enduring. If this bull can keep making higher-highs despite these headwinds, just imagine what will happen when things get less bad!

The critical difference between stalling and resting is what the market “should” be doing. If the news flow is good and the index struggles to rally on positive headlines, that is stalling and something we should definitely be worried about. (Running out of buyers.) On the other hand, if the news is mostly negative and the market refuses to go down, that is definitely a bullish indication and tells us the market wants to go higher. (Tight supply.)

As every cynic can attest to, there are far more reasons for stock prices to tumble than go up. In fact, most pundits are confused by the market’s stubborn resilience. This contrarian behavior confirms there is more energy left in this rally and we shouldn’t give up on it just yet. As obvious as this sounds, something that refuses to go down will eventually go up.

TSLA slumped 5% last week and is on the verge of falling under $600. Violate support and this becomes a great shorting opportunity. On the other hand, bounce off of support and this becomes a great buy. While it sounds like I’m trying to play both sides of the fence, that’s the way these momo stocks work. Either they are racing higher or they are crashing lower.

$600 is our line in the sand. Above support and TSLA is buyable. Under support and it becomes shortable. It doesn’t get any more straightforward than that.

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.