“Tesla Motors Inc. shares hit their highest level in months following a news report about a possible collaboration with competitors Nissan Motor Co. Ltd. and BMW AG on expanding the network of charging stations for electric cars.”
– MarketWatch –
This statement would be logical, if Tesla’s stock prices were in a downtrend before the above-mentioned news, despite the fact, that the effect of positive news during a downtrend is, at its best, transient. But if the trend is already to the north, the news are nothing more than absorbed by the market, long before their appearance. Trends are best depicted on the price charts, so let’s use one to see if the news is the true engine behind Tesla’s recent strength.
As you can see, the uptrend begins at $178 per share, long before the current rally from 202 to 224. Furthermore, the price action during the period between May 9th and June 12th is forming the familiar 5-3 Elliott Wave cycle, after which the trend is expected to resume in the direction of the impulsive five. So, if the direction of the trend was already up before the news, why would anyone say the news drove Tesla up? Because it makes sense to the wider audience, not because it is true. As the chart and the Elliott Wave Principle show, this recent 22$ rally is a natural development, caused by the nature of the Market. It is one more example of news fitting into the pattern, not changing it. And since the pattern is predictable, why would we need news to make a forecast?
Source: blogs.marketwatch.com
Images: www.valuewalk.com
