Chartsmarter Insights

Daily Chart ZTS:

EV Icon Overheated? Will round number theory be the speed bump that stops TSLA in its tracks? Bearish candlesticks have been inaccurate during the last 6 months as markets blew through many of them. Tesla is no exception, but at some point they will matter again, and with the stock struggling near 2000, the candles may take on more significance. Could a blow off top be happening, with the more than 53% jump top to bottom the weeks ending 8/14-21 that were "split inspired"? PRICE action supersedes all else to a technician, but one could easily see a move coming like the one that occurred during two weeks in mid July which saw a violent, but brief move lower of nearly 450 handles. It is still premature as it has been just a few sessions hugging the 2000 figure, but just 10 weeks ago when it spooned the round 1000 number, PRICE action was very smooth. Remember if this bearish wide and loose PRICE action persists that is how tops are normally formed. Of course TSLA is no ordinary stock, and one should look to enter this name on the long side, if there is another couple hundred handle decline. A touch of its rising 50 day SMA, a line it has not been in contact with for 5 months would make a sensible start. It is still 600 handles above that moving average but it will catch up rapidly, almost as expeditiously as PRICE has gone parabolic. 

Software Leader Bending? The software leader based in our neighbor to the north, feels like it wants to head south. It is still premature as PRICE has not confirmed a breakdown, but SHOP should be kept on a possible short list. Remember again that playing shorting opportunities should be strictly on a tactical basis, looking for gains of 5-10%. This week started on a "soft" note down more than 2% on a lukewarm tech tape, but 5 of the last 6 weeks have CLOSED at or within the lower half of the WEEKLY range, and the lone one that did not, the week ending 7/31 still finished nearly 100 handles off an intraweek high. It has recorded a massive move from the round 300 number to 1100 from the March lows to recent highs. SHOP now trades 10% off most recent 52 week highs, and other leading peers that dropped in the 2% neighborhood Monday were TWLO DOCU DDOG NET TDOC and VEEV. Am I expecting material weakness from these generals, probably not, but a quick wash out of 5-10% would wash out weak share holders for the next potential move higher.

Non "Industrial" Representation: The Dow Jones "Industrial" Average is not the same make up of industrial names as it was in years past, but it is probably the most covered benchmark today. Therefore it pays to keep a close eye on it, as its gains or losses could play with the psychology of many market participants. Over time the additions of technology heavyweights like AAPL MSFT, and to a lesser degree CSCO and INTC, has changed the make up of the index. Keep in mind it is a PRICE weighted index, so AAPL quickly closing in on the very round 500 number, has a big impact. The next closest competitor in PRICE is HD trading near 283. But traditional industrial spaces like the truckers and rails are speaking to a stronger economy going forward. The IYT is bull flagging, like just about everything else, and this week was near the UNCH mark, after the prior 3 weeks rose by a combined 12.2%. Other smaller sub groups like the airlines and defense have been weighing on the sector with the JETS and ITA off by 49 and 32% respectively from their most recent 52 week highs. 

When The Facts Change I Do Too..... Software via the IGV had the look of a tried ETF the last few weeks. Not surprisingly round number theory came into play, at all time highs. If it would have went on a precipitous decline, one would have thought it was well needed, or justified. But to its credit the fund is showing resilience near the very round 300 number. It has shrugged off a doji candle on 7/9 CLOSING eight pennies below 300. Then a bearish dark cloud cover that was rejected intraday precisely at 300 on 7/21. Then came four straight CLOSES above 300 between 8/3-6, before the next 3 sessions fell back below 300, losing a combined 5.5% on above average volume. This Wednesday was above 300 once again intraday, before finishing 3 points off its intraday high. Thursday's CLOSE was resolute. The bears chorus of reasons to be fearful is now being silenced with each passing day. The burden of proof is on the furry creatures to continue with the negative thesis, as this looks to be merely a consolidation of a prior powerful uptrend. Either way the rest of August will likely resolve where this space is headed in the near term, most likely higher.