How to Trade Tesla’s Triangle
Tesla's share price is coiling within a symmetrical triangle pattern as the electric vehicle giant gears up to release its Q2 2024 earnings. Let's explore how to trade this setup effectively ahead of the highly anticipated earnings report.
Understanding the Current Trend
Tesla’s prevailing trend is bullish, following a two-legged recovery from the April lows. An initial burst higher in April was followed by a prolonged period of sideways consolidation. This, in turn, was followed by a strong rally in early July, pushing prices outside of the upper Keltner channel.
Recent price action has seen the shares consolidate once again, this time forming a small series of lower swing highs and higher swing lows, creating a symmetrical triangle pattern ahead of today's earnings release.
Past performance is not a reliable indicator of future results
Earnings Preview and Market Expectations
Tesla's Q2 2024 earnings report is highly anticipated, with several key factors in focus:
1. Delivery Numbers: Tesla delivered 443,956 electric vehicles in Q2, surpassing analyst expectations of 439,302 but falling nearly 5% below last year’s numbers. However, these figures are significantly higher than Q1's 386,810 deliveries.
2. Revenue and Profitability: Analysts expect a slight year-over-year revenue decline, largely due to price cuts and increased competition. Q2 revenue is forecasted at $24.7 billion, with earnings per share (EPS) expected to dip 41% to $0.46.
3. Energy Business Growth:Tesla’s energy segment is experiencing robust growth, particularly with record energy storage deployments.
4. Strategic Updates: Investors will look for updates on Tesla’s AI initiatives, robotaxi project, and plans for affordable EV production.
Trading the Triangle Pattern
Identify Key Levels:
• Resistance: The upper trendline of the triangle.
• Support: The lower trendline of the triangle.
Past performance is not a reliable indicator of future results
Timing and Risk Management
Wait for Confirmation: Given the bullish context, probabilities slightly favour upside continuation. However, wait for a breakout above resistance or a breakdown below support to confirm the direction.
Volume Analysis: Watch for increased trading volume accompanying the breakout or breakdown. Higher volume indicates the strength of the move.
Stop Loss Placement:
• For long positions, place a stop loss just below the breakout point to manage risk.
• For short positions, place a stop loss just above the breakdown point.
Target Price: Measure the height of the triangle at its widest part and project it from the breakout or breakdown point to set a price target.
Managing False Breakouts
To mitigate the risk of false breakouts:
Wait for a Close: Ensure the breakout or breakdown is confirmed by a daily close above or below the pattern.
Watch Volume: Higher volume on the breakout or breakdown day adds validity to the move.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83.51% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Understanding the Current Trend
Tesla’s prevailing trend is bullish, following a two-legged recovery from the April lows. An initial burst higher in April was followed by a prolonged period of sideways consolidation. This, in turn, was followed by a strong rally in early July, pushing prices outside of the upper Keltner channel.
Recent price action has seen the shares consolidate once again, this time forming a small series of lower swing highs and higher swing lows, creating a symmetrical triangle pattern ahead of today's earnings release.
Past performance is not a reliable indicator of future results
Earnings Preview and Market Expectations
Tesla's Q2 2024 earnings report is highly anticipated, with several key factors in focus:
1. Delivery Numbers: Tesla delivered 443,956 electric vehicles in Q2, surpassing analyst expectations of 439,302 but falling nearly 5% below last year’s numbers. However, these figures are significantly higher than Q1's 386,810 deliveries.
2. Revenue and Profitability: Analysts expect a slight year-over-year revenue decline, largely due to price cuts and increased competition. Q2 revenue is forecasted at $24.7 billion, with earnings per share (EPS) expected to dip 41% to $0.46.
3. Energy Business Growth:Tesla’s energy segment is experiencing robust growth, particularly with record energy storage deployments.
4. Strategic Updates: Investors will look for updates on Tesla’s AI initiatives, robotaxi project, and plans for affordable EV production.
Trading the Triangle Pattern
Identify Key Levels:
• Resistance: The upper trendline of the triangle.
• Support: The lower trendline of the triangle.
Past performance is not a reliable indicator of future results
Timing and Risk Management
Wait for Confirmation: Given the bullish context, probabilities slightly favour upside continuation. However, wait for a breakout above resistance or a breakdown below support to confirm the direction.
Volume Analysis: Watch for increased trading volume accompanying the breakout or breakdown. Higher volume indicates the strength of the move.
Stop Loss Placement:
• For long positions, place a stop loss just below the breakout point to manage risk.
• For short positions, place a stop loss just above the breakdown point.
Target Price: Measure the height of the triangle at its widest part and project it from the breakout or breakdown point to set a price target.
Managing False Breakouts
To mitigate the risk of false breakouts:
Wait for a Close: Ensure the breakout or breakdown is confirmed by a daily close above or below the pattern.
Watch Volume: Higher volume on the breakout or breakdown day adds validity to the move.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83.51% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
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