Is it time to lock in some profits with Tesla?

TSLA (NASDAQ) Over recent months Tesla has seen explosive growth growing 95.3% since the start of April due to post COVID 19 optimism. In addition to this Musk has decided to reopen the Tesla factories and continuing production which was short-lived as a staff member has contracted the virus. We will be taking a look into the some of technical analysis factors point towards a lower price in the short term.

Bollinger Bands

The Bollinger bands are an additional indicator used in technical analysis to detect volatility if the bands are close together then there is considered to be low volatility however if the bands widen then there is considered to be high levels of volatility. Also, it is very uncommon for a stock to move outside the Bollinger bands if it does, it will more often than not shift back inside the Bollinger band. In the graphic above we can see that the Bollinger Bands have narrowed and for now that suggests that the price is more stable and less volatile, again indicating that the price is likely to remain in this price range. Also as the stock price of Tesla is outside the Bollinger band it is likely that price will fall to go back into the Bollinger band.

Money Flow

The Money Flow Indicator works very similarly to the Relative Strength Indicator however it takes the Volume of a stock into account were the RSI does not. This indicator is used to detect if a stock is oversold or overbought. The default time period is 14 periods with values bounded from 0 to 100. A reading of above 70 means the stock is overbought highlighting a bearish signal that the stock might fall in price. This is the case with Tesla it is at 73 indicating that it might be overbought, as it is right at the top of the Money flow Indicator indicating that it is likely to fall in the future.

Balance of Power Index

The Balance of Power indicator is very simple when the line is above 0 it indicates that buyers have dominance over sellers and when it is below 0 it indicates that sellers have dominance over buyers. The indicator moves between 1 at the very highest and -1 at the very lowest the indicator tracks how strongly price trades to extreme high and low levels. The Reading Tesla has is -.01 which is starting to indicate sellers are dominating the buyers in the market pointing to the conclusion that Tesla shares may move lower.


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