True Market Leader Review: Tesla (TSLA) March 2020 - February 2021

During market downtrends, leading growth names usually correct 1.5 to 2.5 times the general market.  When the coronavirus pandemic hit, Nasdaq corrected 32.6% while S&P 500 drew down 35.4% during a swift two-month swoon from February to March 2020.  TSLA, the True Market Leader from October 2019 to February 2020, corrected almost twice as much as the Nasdaq as it lost 63.83% from peak to trough.

The Tesla story did not end with the COVID-19 bear market.  Here is a timeline of TSLA's move as it recovered from the V-shaped bear market:

• March 18 - March 19: TSLA undercut the 200-day SMA on March 18 then regained it the following day. The two-day undercut and rally of the long term moving average marked the bottom of a developing structure.  TSLA worked its way higher with a wide-and-loose action typical of a stock that was trying to find its footing.

• April 2 - April 6: S&P 500 staged a Day 8 follow-through day on April 2.  Almost no one believed this market buy signal as the effects of the COVID-19 pandemic took its toll, affecting everyone physically, mentally and emotionally.  On April 6, two trading days after the S&P 500 follow-through day, Nasdaq staged its own follow-through day when the tech heavy index gapped up and gained 7.33% on above average and heavier volume than the prior day.

• April 13 - May 29: TSLA regained the 50-day SMA as it gapped up 13.6% on just above average volume. It followed up with another gap up on April 14 as it closed with a 9% gain.  It continued to be volatile for a few more weeks.  On April 30, it hit a high of 869.82 (pre-split price), then reversed lower on heavy volume.  It sold off the following day but found support at the 21-day EMA.  Volatility started to subside in the next four weeks.  The right side of the V-shaped cup with handle resembled a high, tight flag pattern with a 7-week flag pole length of 148% and a 21% deep 5-week long flag.

• June 1: TSLA had a mini-gap up and gained 7.6% on light volume as it broke out of the 869.82 pivot of its V-shaped cup with handle / high, tight flag pattern.

• June 10 - June 30: TSLA gapped up to an all-time high through the prior high of 968.99 from the left side of its base.  It printed a new all-time high of 1027.48, then closed above 1000.    It was followed by an almost 3 weeks of tight consolidation around the highs with the 21-day EMA providing support.  It proceeded to make a higher high on June 30 as it cleared the prior marked high of 1027.48.

• July 13 - August 11: On July 13, TSLA hit a new high then reversed lower on heavy volume.  That negative reversal paved the way for a new high, tight flag pattern.  Five weeks later, it undercut the 21-day EMA for two days.

• August 12 - August 30: TSLA gapped up above the 21-day EMA and gained 13.12% on heavy volume on the announcement of a 5-for-1 stock split.  Weekly chart showed a positive outside reversal on a near test of the 10-week line.  It rallied for four weeks and closed at an all-time high on the day of the split on August 30.

• August 31 - November 13:  Excessive stock splits usually precede a correction on a stock following a run-up from the announcement. TSLA exhibited this classic behavior.  Following the stock split, TSLA had a negative reversal on the weekly chart and entered into an 11-week, 34% deep correction.  On the week ending October 30, TSLA shook out as it broke below the 10-week line on light volume.  It reclaimed the 10-week line the following week but closed back below this moving average again by the end of the week on November 13.

• November 17, 2020 - January 8, 2021: TSLA then gapped up on its 11th week inside the base.  The following day, it triggered a new higher high through the 465.90 (2,329.50 pre-split price) early pivot.  It then broke out of its base over 502.49 (2,512 pre-split price) the following week, then ran-up for seven weeks until the first week of January 2021.

• January 25 - February 19: TSLA hit a high of 900.40 (4,502 pre-split price), then staged a negative outside reversal on the weekly chart.  Weekly volume was low but it continued to trade sideways to lower until it tested the 50-day/10-week moving averages.

• February 22 - 26: TSLA flashed a major sell signal as it broke below the 10-week line on heavy volume.  It closed down 13.54% for the week on 43% above average weekly volume and ended the week 13.8% below the 10-week moving average.

TSLA gained 288% in 39 weeks from the 869.82 pivot of the V-shaped cup with handle / high, tight flag pattern until the weekly close of 3377.50 (pre-split price) when it triggered a sell signal with the heavy volume break below the 10-week moving average.