Active-Trader - 5 Days of Fib - Day 4

Welcome back Active Traders and Wealth Builders.

In this post, let's tackle the voodoo lines for Tesla (TSLA).  I struggled mightily to come up with levels that corresponded to a screen shot I picked up in a free video from John Carter from Simpler Options which showed just 2 lines at 274 and 169.  I didn't know which lines these were in the sequence and could not figure out anything obvious from the chart that correlated with these levels.

To unravel this mystery, I put together the above table that shows the different levels in the fib sequence along with relationships between the levels. The sample column shows an idealized wave 1 move from 10 to 20 and the resulting prices for the subsequent levels.  The % Up column shows the percentage change between the prices at that level from the 1.0 level at the end Wave 1. Given that, can you fill in the remaining levels for TSLA?

To figure it out, I took the difference between 274 and 169 and came up with 105.  Note that percentage up between the 4.23 line and the 2.61 line is double (16% to 32%).  So divide the 105 by 2 and you get 52.5 which is the height of Wave 1.  Subtract 52.5 from 169 and you get the 1.61 line at about 116.5.  Now subtract 31.5 (0.61 times 52.5) from 116.5 and you get the top of wave 1 at about 85 and the bottom of wave 1 at about 32.5.  Fine, but do these associate with actual chart levels?

Both Thinkorswim and TC2000 could not help answer this question since they could not provide clear daily charts at times in the past  However Tradestation came through like a champ and I was able to find levels which corresponded with these numbers as shown in the graphic. Using that, I estimate that Wave 1 began back on 3/15/2013 at a price level of 35 and ended at 85 on 5/15/2013.   Note how after a rest at the end of wave 1, TSLA quickly ran up to the 1.618 line and paused, further evidence that we have the correct levels.

Given all that, here is the complete set of Voodoo fire lines for TSLA. The all time high in price at 265 is just beyond the 423% line at 239.  Since then TSLA has been in retreat and the next major support is the 261.8% line at about 181.  That said, I hate TSLA stock on the long side since the valuation is ridiculous at these levels.

Overall, I spent about 4 hours trying to unravel this mystery.  But now that I understand the price relationships between the levels, it will be easier to calculate the missing lines when I just know 2 of the 5 line set.

Enjoy the rest of your weekend and have a great trading week ahead.