Trailing Tesla
How you could have taken advantage of the last setup on Tesla…
Ultimate Gann Course students had the privilege of reviewing Tesla (NASD: TSLA) in the Platinum article of May 2019 to see how it was going to react off the all-time high’s 50% level. For those Active Trader students considering taking the next step to the Ultimate Gann Course, we will review the insights of the TSLA set up and explore how you’d be able to take advantage of this set up too, starting by using your Active Trader knowledge.
As you’d be familiar with, Gann saw retracements occurring at the halfway point of a move, such as 50% – which is half of 100, 25% – which is half of 50%, and 12.5% which is half of 25%. However, when analysing this concept, what is often overlooked is the fact that every market is different, it sometimes doesn’t show the actual percentage change at precisely 50%, but rather in a range of 45 to 55%.
David Bowden talks about this in the Ultimate Gann Course, and suggests to look at the market as a ‘loose garment’. The importance here is that the 50% danger zone provides a potential pivot point zone, which has a higher probability for a change in trend.
The 2019 decline in TSLA to the 50% level (danger zone) emphasises the above points. Tesla’s All Time High (ATH) was $389.61 on 18 September 2017. By applying a high’s resistance card to this seasonal high you can see that the market had broken through the 50% level at $194.80 by May 2019.
At the time when Ultimate Gann Course students were reviewing TSLA in May 2019, the market had a weekly close below the 50% level. While you may be convinced that a change in trend would occur on 50%, you’d soon lose hope of that happening.
An experienced trader however, who understands form reading might not have given up just yet on the 50% bounce. They’d be watching the three distinct lows made in 2014, 2015 and 2016, where the market could have reacted at approximately $180. This would be an approximate 54% retracement as opposed to the precise 50% retracement – so you’d be wearing the market like a ‘loose garment’ and if you know your market like a ‘cow knows its calf’ you would be ready for what was to come.
As it turns out the market made its low at $176.99, taking out any stops behind the 2014, 2015 and 2016 lows, prior to bouncing back above the 50% level at $194.80. Assuming you had just signed up to the Ultimate Gann Course and had read the platinum newsletter, you could have still traded it using Active Trader tools.
Firstly, you could have traded it as a Double Bottom with the November 2016 low at $178.19. This would have been a more conservative entry trading the weekly chart, as the market spent the early part of the week trending down, followed by a strong rally at the end of the week. If you were watching and anticipating, the entry could have been the break of the previous weeks high at $195.10, which was just above the 50% level, with the stop loss underneath the new weekly signal low at $175.50.
This was a risk of $19.60 per share/CFD. Risking 5% of your $10,000 trading account that would be 25 CFDs. This position would currently be in profit with stops at break even as a minimum. You may have considered trailing the 2 day swing chart as your stop strategy.
For those trading the daily swing chart, an opportunity came with a first higher swing bottom or the ABC long trade. Point A was on 3 June 2019 at $176.99, Point B was on the 12 June 2019 at $223.38 and Point C was on the 13 June 2019 at $207.51.
Using the traditional stock style entry on ABC trading parameters, the entry limit would be at $219.10 with the entry stop at $214.91. The stop loss would be at $207.50, giving a risk of $11.60 per share/CFD.
Risking 5% of your $10,000 trading account that would be 43 CFDs. The position would have already shown a 2:1 reward to risk and still currently be in profit with stops at break even as a minimum. You may have been stopped out depending on how aggressive your trade management style was.
Regardless of how you traded the setup, the fact is even though you took the decision to educate yourself further with the Ultimate Gann Course, you would still have the ability to execute trades whilst increasing your experience and knowledge base.
It’s Your Perception.
Robert Steer