The market is littered with fad stocks that made swing traders lots of money off amazing runs only to fall by the wayside after a few years. Pick up any of William O’Neil’s books on trading and you will find tons of examples. It looks like Tesla may be on it’s way to the momo stock graveyard.
Everyone of these fallen leaders forms a topping head and shoulders pattern, followed by a trend line break and increased volatility. That is exactly what we are seeing in TSLA right now. In the chart below, take note of the classic head and shoulders pattern, along with the break of the trendline and 200 day moving average.
How do we trade this pattern? Short weak bounces until they no longer work.
How does Tesla recover? A remount of the 200 dma and trendline would bring it back from the dead and turn it into a momentum stock once again.
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