Tesla May Of Just Put In An Epic Bottom

Two weeks ago I posted about why Tesla is going higher long term. The 10 EMA on the monthly chart I posted ended up being the low that Tesla would make an epic bounce from. Based on the strength of this chart, I wouldn't be surprised to see this retest $200 in the future.

This Bull Market Is Looking Tired

The Ratio Adjusted Summation Index is a great tool to measure the strength of a bull Market. The chart below is the Ratio Adjusted Summation Index ($NYSI). The $NYSI is calculated by adding the daily values of the McClellan Oscillator. Readings above 500 convey the message that we are in a bull Market and will continue to make higher highs. We have had some extraordinary high readings in the past (refer to the chart below). For a long time, this chart stayed above the 500 threshold (look at April-May it hit 1200+), and that promised us higher highs in the Market. However, lately, the last two instances this indicator went above the 500+ threshold (July & November) the indicator barely stayed above 500+ (and was quite low compared to previous visits above 500).

I think we can extract two pieces of information from this chart. The 1st is the Market will still make higher highs as it went above 500 back in November. Secondly, the last two "weak" stays above 500, have shown this bull Market is tiring. For undeniable strength, you like to see this indicator stay above 500+ for at least a few weeks, and hit highs 700+. The fact it has been unable to break 600+ (not once, but twice) shows that this bull Market is weakening.

I am not making a call here, but rather pointing out that this current bull run is weakening. The Market isn't static, a lot can happen, so just because it looks tired now, doesn't mean it can't be "refreshed" by some unforeseeable macro news. Its also important to note, that just because its tired doesn't mean we are going to crash or we will be in a bear Market. What might happen instead is momentum to the upside might not be as strong (in other words the Market won't be getting 20%+ gains every year).

To simplify this post: QE3 isn't as effective as it use to be.

Apple Overbought (Short Term Outlook)

The best and most reliable indicator of being overbought is not RSI, or Full Stochastic's; the best indicator is Bollinger Bands for indicating a stock is overbought. A stock's price being outside the upper Bollinger Band is the sign of a stock being overbought, furthermore if you see a stock's price outside its upper Bollinger Band for multiple days you have a very strong signal. That is just the case of Apple, as shown in the chart below. Take notice of the 5 EMA as well, and how far it is away from Apple's price. Usually when the stock hits the 5 EMA, or fills its gap it tends to proceed higher (which can all happen in a span of an hour at the open on Monday). So in other words, for the short term, I am bearish on Apple, but in the medium & long term I am still bullish.

How to Play Twitter, Tesla, Facebook and Yelp Long

One of the best momentum indicators for going short term long is when the 5 EMA crosses over the 10 EMA. Right now $TSLA, $TWTR, $FB and $YELP are in short term downtrends, as the 5 EMA is below the 10 EMA. A good way to go long these stocks is once the 5 EMA goes above the 10 EMA (bullish crossover) it is a "safe" entry to go long. Trend traders often exit these stocks once price closes below the 5 EMA. So in other words, ride the 5 EMA up. Similarly, these stocks can be shorted when the 10 EMA crosses below the 5 EMA, and cover once price closes above the 5 EMA (I don't like this play as much, although it already happened and has made massive profits). My friend Steve Burns, plays a very successful trend strategy using the 5 EMA, you can learn more about his strategy by visiting his website.  If you like this strategy, I suggest studying the Tesla chart below (left chart) to see how strong the 5 & 10 EMA crossover signal is, as well as what happens to price when the stock is below and above the 5 EMA.