Now this, kids, is what a *real* parabolic advance looks like. But in the words of Merrill Lynch's legendary Bob Farrell, "Parabolic advances usually go further than you think, but they do not correct by going sideways". #ForTheArchives pic.twitter.com/QIfH9lFzMd
— Walter Deemer (@WalterDeemer) February 4, 2020
Today’s Chart of the Day was shared on Twitter by Walter Deemer (@WalterDeemer). It’s a daily bar chart of the highly contested electric car maker, Tesla ($TSLA), over the past year. The stock has been on an incredible rally in recent months. It hit a multi-year bottom in June, around $179 per share before surging nearly 400% to where it’s currently trading around $886 per share. The stock continues to burn through relentless short-sellers, who add fuel to the fire as they’re forced to buy-to-cover as shares move higher. Walter quotes legendary technical analyst, Bob Farrell, who once said: “Parabolic advances usually go further than you think, but they do not correct by going sideways.” In other words, the momentum from these rallies can carry the stock far higher than what anyone thinks is rational. However, once the momentum dissipates, the subsequent correction tends to be sharp and violent as opposed to a sideways consolidation, where price corrects through time.