Benzinga - by Melanie Schaffer, Benzinga Editor.
Tesla, Inc (NASDAQ: TSLA) was trading slightly lower Wednesday after surging 7.69% on Tuesday, propelled by a decline in U.S. job openings, which increased hopes the Federal Reserve will choose to hold interest rates steady when it meets next month.
On Tuesday, the EV giant closed at the 50-day simple moving average (SMA) and on Wednesday, the stock was consolidating near the top of Tuesday’s range, forming an inside bar pattern.
An inside bar pattern indicates a period of consolidation and is usually followed by a continuation move in the direction of the current trend.
An inside bar pattern has more validity on larger time frames (four-hour chart or larger). The pattern has a minimum of two candlesticks and consists of a mother bar (the first candlestick in the pattern) followed by one or more subsequent candles. The subsequent candle(s) must be completely inside the range of the mother bar, and each is called an "inside bar."
A double, or triple inside bar can be more powerful than a single inside bar. After the break of an inside bar pattern, traders want to watch for high volume for confirmation the pattern was recognized.
While Tesla’s inside bar leans bullish, if the stock continues to reject the 50-day SMA it could eventually break down from Tuesday’s mother bar, which could cause volatility in the stock market to pick up.
Traders wishing to play the potential volatility in the stock market can use MIAX’s SPIKES Volatility products. The products, which are traded on SPIKES Volatility Index (XMIO: SPIKE), track expected volatility in the SPY over the next 30 days.
Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.
The Tesla Chart: Tesla’s inside bar is taking shape near the top of Tuesday’s trading range, which leans bullish for continuation later on Wednesday or on Thursday. If the stock breaks bullishly from the mother bar, it will regain the 50-day SMA, which will give bullish traders more confidence going forward.
- Tesla is trading in an uptrend, making a series of higher highs and higher lows. The most recent higher low was formed on Aug. 24 at $228.18 and the most recent confirmed higher high was printed at the $240.82 mark on Aug. 22.
- If Tesla regains the 50-day SMA and continues to edge higher within its uptrend, a gap that exists between $280.93 and $289.52 is likely to fill. If that happens, the stock may find at least temporary resistance at the upper range of the gap, which could provide a solid short entry.
- Tesla has resistance above at $265.10 and at $271.71 and support below at $254.98 and at $234.35.
Image sourced from Shutterstock
© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.