Technical Analysis (with EMA) - TSLA, MSFT & BABA

Before I start, let us not forget that we will need to qualify the business first through reviews of its fundamentals over a good period of time.  Its recovery from the ongoing pandemic can give us assurance on the quality of the businesses and the durable competitive advantages that it owns.  What I am doing now is the technical setup that helps me to take a position for trade or when a great company reaches a range of "discounted" prices.  This is also known as the margin of safety that value investors add.

Personally, I prefer investing over trading that it essentially has a much longer-term time horizon - over 10 years into perpetuity.  Trading requires much more effort & closer monitoring.  The timezone difference does not permit me to trade actively when I live 12 hours away from the US market.  For the coming examples, I am exploring trading and not investing.

Coming to trades, we need to consider market sentiment as that can drive the prices in the short term.  For a start, let us look at S&P 500 for a start which recorded a 52 week high of 4,818.

Market overview (S&P500)

S&P500 chart as per 30Apr2022

In mid-March 2022, we identified a death cross (intersection of the Moving Average 50 & 200 lines where the MA 50 cuts MA 200 from above, a usually bearish indicator) using the 1D chart.

The stochastic indicator is hugging the bottom, a typically oversold region.  This "hugging" along the bottom can be "prolonged" with constant decline.  Now, let us look at the MACD indicator that indicates a downtrend.  From my 3 EMA lines (exponential moving average of 8, 13 & 21), the lines appear to be on a downward trend but more importantly, the lines are "not converging".  This can imply that there is some strength in the current (downward) trend and this should take a while.  We see an important support level around 4100 and this can be a crucial support.

Thus, the decline of a stock price does not always represent the "loss of value".  The value and stock price are seldom in agreement and it is at these instances where we can "take advantage".

BABA stock technical analysis

1D chart of BABA as of 30Apr2022

From the 1D chart of $BABA above, we can see that the stock has been on a perpetual downtrend.

The Stochastic indicator points to an uptrend and the MACD is about to confirm a cross over (a typically buy signal).  What is interesting is that the 3 EMA lines are also converging.  Typically when they converge, it also serves as a signal for the reversal of the downtrend.  It is essential that the most recent downtrend fail to challenge the 52 week low of 73.28. with the candle finally touching the MA50 line, there is hope that the price is moving away from the bearish sentiments. 

Interpretation of MA50 & MA200 lines

Using the MA50 line (as a short term trend outlook), a candle underneath the MA 50 line can imply a bearish zone and a break above the MA50 thus can also read as stock getting less bearish in the short term.  We can also use the MA200 line for bearish and bullish sentiments for the stock - this represents a longer-term where it can be typically treated as an "annual" outlook.

MSFT stock technical analysis

1D chart of MSFT 30Apr2022

From the 1D chart of MSFT above, we have the following, there was a death cross (a typically bearish signal) in Mar 2022.  The stochastic indicator is showing an uptrend and the MACD indicator looks to be bottoming up, forming a likely uptrend in the coming days.  The EMA lines have yet to "converge" and thus, do not show a change in the current downtrend as yet.  If we are prudent, we can afford to wait out for the EMA to converge and bring about the confirmation of reversal.

TSLA stock technical analysis

1D chart of TSLA 30Apr2022

From the 1D chart, the stochastic indicator looks to be breaking out from the "oversold" region as it continues to range along the bottom.  The MACD indicator still shows a downtrend and we can expect a "bottoming" up soon. From the EMA, it is still showing a downtrend without any change or reversal as yet.  The EMA lines remain downtrend and have not shown any converging.  This implies a downtrend.

Technical analysis for Tesla

For Tesla, the technical analysis above is still showing "STRONG SELL" for the 1D chart.  There are support levels 789, 818 and 836 using Fibonacci.

Personally, I am hoping to enter Tesla when it is at low 800s or under 800 levels.  As always, let us do our own due diligence before investing.