TSLA and the Trading Mentality

Yesterday I wrote about TSLA having a potentially bearish setup below $158.51.  It had all the components I would look for – a head and shoulders, a clear neckline, a wobbly OVI.  

It duly broke through its support intraday, but came back strongly to form a potential reversal doji bar.  

tsla 2013.10.30.jpg

As a trader you sometimes have to make swift changes of tack.  Price action can change pretty quickly and in this case it has done so.  Don’t worry about the reasons and whether you’re right or wrong, the fact is that this stock is very well followed, it has earnings on 5th November and over the course of the next couple of years it’s going to yield some fabulous trades … and a few flip-flops too.  

This may be a case in point.  I was looking for a clean break of support, perhaps a nice consolidation and then more downward action.  

But yesterday’s doji makes that unlikely for now at least.  So, with our trader hat on you now have a choice.  Either stick it out to Friday’s high ($174.50) before bailing (I don’t like this option).  Or exit the short if it breaks the doji high for a small loss.  Or exit the short at the doji high and go long just above that level for a doji reversal trade.  

The point being this: there are times where your trade will set up … and then it throws a bit of a curve at you.  If you’re going to make a loss, the quickest loss is always the smallest loss.  And sometimes you may even get the opportunity to flip flop … which in trading is not a sign of weakness.  

Remember this stock is constantly in the news, has earnings in a few days and it’s all getting quite buzzy.  If you’re conservative the best strategy may be to sit it out until we know what the numbers are.  

All the best


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