Chart of the Month Tesla (May 2022)

April was an amazing month for our TSLA stock and options trading group, such a blessing to invest in these amazing companies. The draw down we've seen in stocks last month has been a wild and profitable ride for our group, but not so much for many thematic hedge funds

This past month TSLA options trades generated significant alpha for everyone in the group. April destroyed massive hedge funds with some notable hedge funds down -28% in April with one in particular losing nearly 50% in AUM. With nearly everyone now 100% bearish it's getting close to the time for market makers to shred the shorts that have overstayed their welcome. On Friday one interesting options alert for Tesla (Nasdaq: TSLA) caught my eye on one of my most favorite companies, "Tesla".

Those of you that are familiar with our work know that we incorporate point and figure analysis into our daily technical and fundamental analysis on stocks with the highest volume, one such instance came on Friday where TSLA, against all odds, triggered a point and figure "long tail up" on Friday with a juicy price target of $1,140 using basic principles of P&F technical analysis suggesting a +26.4% potential upside from Fridays closing price. Here's the visual:

Before you get too excited for the bullish price target let's remember that TSLA like many other stocks are in a bear market (defined by -20% or more below the 52 week highs) and we should temper our expectations as a bullish outcome on signals generated in a bear market are less likely to come to fruition, not impossible but the odds are against the perma bulls. let's take a look beneath the hood and see if the point and figure price target is viable and furthermore is the selling over?

First thing that comes to mind is that TSLA was less than $50 per share a little more than a couple years ago, trades at an insane price to earnings ratio of 119.61 vs Industry peers of 14.98X so based on typical (boomer) metrics you won't see Berkshire Hathaway running out to scoop up TSLA anytime soon. Tesla makes an insane product, great company run by a true genius, the numerous revenue streams generated by Tesla sends analysts into a frenzy as they try to apply typical valuation metrics to Tesla's manufacturing businesses, cars, software, energy, insurance, subscriptions and much more.. in the end only price matters.

The closing price on Friday for TSLA was still trading below the 200 day moving average and trading down nearly -30% off the 52 week high in (bear market territory) and still trading -7% below the simple 50 day moving average, so the stock has some work to do to repair the technical damage and the P&F targets could and will likely change over the next couple weeks. One of the most notable options alerts I saw on Friday was the 2.7M order for May-6-2022 900 strike puts @ 50 bucks each x 530 contracts, likely an investor locking in profits on their puts ahead of the weekend.
That having been said, the stock could easily retrace back to the: 38.2% Fibonacci near $768 with the 50% Fibonacci support being near $628 61.8% Fibonacci support near $488 On the upside, TSLA needs to reclaim the $905 level on a closing basis, should we see that happen next week that would increase the likelihood of a re-test of the next confluence of resistance near $935-$950.

There is also a Fibonacci confluence area near $980-1020. This article was originally featured on The Day Traders Journal