Recent TSLA Action Shows News Does Not Drive Price Trends


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I am constantly preaching how important it is for traders to control their emotions during situations when market conditions aren’t working in their favor.

But it’s also important not to overreact to seemingly negative headlines.

Let’s face it, sensationalized headlines are often used as clickbait.

In the world of finance, however, it’s usually a good idea to go beyond the headlines to find the real story.

This past week, several financial media outlets tried to lead investors into believing that Cathie Wood’s ARK Invest funds have been “dumping” shares of Tesla Inc. (TSLA).

While certain ARK Invest funds have sold more than 350,000 TSLA shares valued at about $266 million in September so far, the stock remains the fund company’s biggest holding, and Wood maintains her outlook for TSLA to hit $3000 a share in 2025.

One lesson that traders tend to struggle to learn is that news does not drive market trends.

Instead, it’s ultimately a mix of supply and demand forces and psychology that shape the bigger trends.

News only produces short-term trading reactions that, more often than not, cause a stock’s price to “pin-ball’ between key technical levels.

Today, I am going to help you understand how to identify the key chart actors that have helped shape TSLA’s price action in the first half of September, and I’ll reveal what the charts are suggesting TSLA’s stock might do in the second half of the month.

Cathie Wood has developed a cultish following

Woods’ views are seen as being important because of the sort of cult following she and the ARK family of funds have developed as a result of bold and successful market calls on high-profile companies like Tesla.

Specifically, back when shares of Tesla were trading for several times less than current prices, Wood had suggested that Tesla’s price could hit $4,000 per share by 2023. Note: this was before it split 5:1 so the equivalent share price post-split was $800 – which it hit two years sooner than her projection.

ARK Invest’s strategy regularly involves selling some of its winners to prevent them from becoming too large of a holding, then investing those proceeds in other targets.

This type of “rebalancing” activity is a commonly used strategy across the mutual fund industry.

The technicals were warning that TSLA shares would struggle to maintain their gains

As I suggested earlier, meaningful press releases often generate price moves that are shaped by key technical levels and rarely alter the direction of the prevailing trend.

In the case of TSLA, recent headlines related to the sale of its stock by ARK Invest come at a time when the stock was showing tired upside momentum as it was getting ready to push above the 02/19 – 02/22 gap, which it failed miserably to push above back on 04/14.

Figure 1

Note: Gaps such as the 02/19 – 02/22 gap are incredibly important resistance areas to pay attention to, and it can often take several attempts to move beyond them.

But that selling has been contained on the downside by the rising 34-day moving average (a popular Fibonacci number that I like to follow).

This bouncing between resistance and support is a perfect example of what I suggested earlier, which is that news often influences stock prices to “pinball” between key levels within a prevailing trend.

In the end, while news of ARK Invest’s selling of TSLA shares did help to generate significant volatility on 09/10 and 09/13, traders that were able to maintain their emotions and read beyond the headlines were able to use the charts to find a fantastic buying opportunity, within the prevailing uptrend, at the rising 34-day at the start of this week.

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