Potential Swing Trade Opportunity With TSLA

Tesla's share price is near an inflection point. There could possibly be a very good short-term trade opportunity next week.

Tesla has been in a bear market since the beginning of 2022. So the long-term trend is down so far. In the medium term, since the beginning of this year, TSLA's share price has rallied over 100%. But the short-term trend has been downward for the past couple of months.

In the chart below, I have highlighted the support and resistance levels for the medium and short-term trends. I have also highlighted the major fibonacci levels as well. These are the levels I will be watching. The behavior of price action near these technical levels will dictate the entries and exits of my swing trades.

The price of Tesla has recently rebounded off of the medium term trending support. This tells me that the price action wants to continue upwards.

But the short-term trend is downward, as you can see in the chart below. This short-term trend could possibly continue. Especially with all of the negativity towards equity markets lately.

Should I go long and follow the rebound within the medium-term trend? Or should I go short and adhere to the short-term trend? The entries and exits of my swing trade will depend on what the price action is doing near these technical levels.

When you zoom in to the short-term trend, you can see that the price action is forming a wedge pattern that resembles a bullflag. The wedge pattern is forming near the resistance of the short-term trend as well as a couple of fibonacci levels that act as resiatance. A breakout to the upside of either of these levels could warrant a bullish swing trade.

The support line within this bull flag coincides with a minor support level. If the price breaks down below this level, then a short swing trade could be warranted.

The faster and slower oscillating subindicators, on the very short time frame, are about to roll over into bearish territory. If they do flip into bearish territory, then this could possibly coincide with the price breaking down below the minor support level I have mentioned. This would be a short-term bearish development.

For next week, I am planning to enter into a very short-term swing trade. My trade will depend on the price action of TSLA. I have illustrated the potential trades in the chart below. I will likely go long by buying calls when the price breaks out to the upside of the wedge pattern. I will take some profit as the price continues to climb. Once the price reaches the fibonacci level, around the $258.00 price point, then I will consider whether or not I should exit the trade or hold for a little longer. If the upward momentum continues past this fib level, then I will hold. If the price starts to show friction near this resistance level, then I will likely exit the trade.

If the price breaks down below the minor support level, around the $243.00 price level, I will likely enter into a short position. To do this, I will buy puts. I will take profit regularly as the price is falling. I will consider whether or not to exit the trade once the price reaches the next monor support level, near the 233.50 price point. If the downward momentum persists, then I would consider holding longer. If the price action finds resistance near this support level, then I will likely exit the investment.

I will not enter into any swing trades as long as the price remains within the wedge pattern.

There is always the chance that the price will break out or break down and then quickly reverse into the opposite direction as soon as I enter into the trade. False breaks are common with TSLA. If this is the case, then I will convert my trade into a spread to cut my losses while the price action is going against me.

If my long calls turn against me, then I will convert the calls into a short credit spread by selling calls at a lower strike price than the previous call contracts. If the short position goes against me, then I will convert my puts into a long credit spread by selling puts at a higher strike price than I am already holding. In either of these cases, I would want the spread to be tight enough to close in the money on expiration.

This is just an illustration of what I will be thinking of next week while I'm watching TSLA. If there is a solid catalyst in the news to push the price in either direction, then that will give me a bit more confidence in the trade. The expiration dates I will choose will be the end of this month or the middle of next month expirations. The strike prices I will choose will be near or at the money.

As always, this is not investment advice. Good luck trading. Be careful and be patient. Dont anticipate the market. Rather, participate in the market. Give your investments time. Don't be greedy. Don't invest in anything you don't understand. Don't put all of your eggs in one basket. Don't listen to the hype. Don't fomo or panic into or out of trades. Do your own due diligence. And just follow the trends. A trend is your friend.