TSLA: A Room Full of Conflicted Parties

It’s October 20 and Elon Musk is commenting on a possible merger between TSLA and SPCX. And then the key phrase emerges, “Because I’m a conflicted party, I can’t actually be in the discussions.” This can be framed in various ways. The fanboy will say, “He’s being open and straightforward.” The critic will say, “He’s just fulfilling regulatory requirements.” So Musk won’t be in the room?

But the room we all are in is different. It’s not the boardroom. There are no directors. This is the crowd and conflicts abound. There is fear and greed pushing and pulling. Some can be even an extreme of each. Conflate panic with either and you take them to the next level.

The discussion across this table is made with buys and sells. Pressure ebbs and flows. One will eventually overtake the other. When structure from these moves forms, we are able to recognize its message and then project likely paths forward.

Angles and Biases

Many truths are proffered from experts. But do you know what their angles are? What about being able to discern any biases that may exist? Can you imagine if you knew what earnings would say ahead of time? That sounds like a dream scenario. However, even then, they would not indicate how the crowd would react.

Here is the latest case: TSLA Q3 adjusted EPS came in at $0.48 against $0.45 expected. The stock rose 3.4% into the print on October 21, then fell 3.1% the next session. Earlier this year an April beat drew a 3.6% drop the next day as well. Was this due to the narrative, or something else?

As soon as you begin to embrace any narrative, your objectivity will fade. Take the longer record. Over the last 12 reports, TSLA moved against the EPS surprise 7 times out of 11.

TSLA stock will typically push to extremes in both directions. Emotional, irrational to most, sentiment behind the wheel. This is drive-by-wire at work.

We would like to believe that earnings motivate these moves. What was pushing it when there were none? What continues to fuel the locomotion? It is sentiment — crowd behavior.

What is the basis for such an affirmation? Tesla went public in June 2010 and posted its first full-year profit, $721 million, for 2020. Tesla had profitable quarters before 2020, the first in Q1 2013 and more in 2016, 2018 and 2019. What it lacked for its first ten years as a public company was a profitable full year. And yet, during this time period, the shares rose roughly 25-fold from the $17 IPO price to the end of 2019. So it wasn’t earnings moving this train.

A Vote Cast on the Chart

Musk also said that a merger would need approval from 50% of all Tesla shareholders, not just those who vote, and described that as challenging.

Convincing this crowd will come down to one factor: price. Price is always the ultimate arbiter. TSLA shareholders will have a price in mind for which they will surrender their shares. What will that be? Let’s see some more structure. It could be that the crowd will cast their vote via the chart long before any offer is conceived.

Our Seat at the Table

As analysts, we never trade against the charts we share. Hedging is plausible at potential turns, but what you see in the Wave Setups and structures illustrated is our view.

A personal stake in the outcome can be key in that you will be hyper-vigilant to any shifts in the structure. But you just can’t allow that stake to anchor you to a belief that is no longer supported by price. 

I’ve sat in that seat on this very stock. In March 2024 I bought a half position in TSLA at $163.65, with the larger structure pointing higher. Price rallied to $184, stalled at resistance and rolled over. My view of the bigger picture hadn’t changed, but the near-term structure had, so I let a trailing stop take me out with about four points of profit. Price went on to $138 before the next bullish setup took hold and gained 62% by July.

We have been watching TSLA closely as it will frequently generate reliable scenarios with clear parameters. This summer, price broke below $356, the invalidation level in the setup we shared here in May, and that setup was done. Keep in mind that singular setups may invalidate while the larger bullish structure remains intact.

Each day provides further information to the structure of price on the chart. As this fills in, new facts are presented. When the facts continue to agree with the primary path scenario, we follow the trail. If the facts change, then so does our opinion.

Perma-Price

Price is truth. There is no story. No narrative. No bias in price. Subjectivity may creep in, so the analyst must not be perma-anything other than perma-price, meaning that this is really the only thing that matters. It does no good to stand on ceremony as the cathedral burns down around you.

Bias comes from stories and narratives. If one is able to divorce themself from the story then price is all that matters. Don’t take this as blinders to any and all fundamentals. Those are important as well, but in hundreds of cases we have observed over years of work, it is sentiment that leads at the turns. 

Big Picture Possibilities

Note on the attached chart that price is likely in the middle of a multi-month rally. The structure for TSLA paints a path higher. Zac Mannes is showing that it is in a third wave of Intermediate degree in the white path. There are other possibilities that he shows and would make known their likely intent with the reaction to those levels, if/when seen. White remains primary and the purple shows the probable subwaves of that path.

The summer low came in near $297, close to the 61.8% retracement Zac marks at $291.

This likely represented a washout of bearish sentiment and reset to continue the larger bullish structure higher. $452 is the next near-term target we are watching to complete. 

The other longer-term targets are big-picture possibilities based on the context. We adjust with the reaction to key levels inside the structure.

A Cagey Crowd

Below you will see Zac’s update for the morning of October 22.

There are times where the crowd is a bit cagey regarding intent at the smaller degree. That’s why the parameters. As of publication, this is an active and valid setup. The levels are clear: support at $365, resistance at $395.70, a $452 target, and invalidation below $320. 

Zac’s own note on the update table is worth a close read. So far price has managed only three waves up off the October 16 low, which is not yet a reliable launch of the next leg higher. Should price break down from here, the more likely read is the alternate purple b, a deeper pullback before the advance resumes. That is why invalidation sits at $320 rather than at support.

The Crowd in the Crucible

If one has a long-term view in TSLA, then the structure yet reads bullish with much higher levels to be seen in the years ahead. Near-term there is also a specific setup as shared that points upward. Parameters tell us when this is further confirmed or when it would even negate, thereby triggering a reset.

We might even call this room the crowd in the crucible. This is the proving ground. True intent via the structure of price regardless of any apparent conflicts.