AaronJackson's  Instablog

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I'm a swing and position trader using stocks and options. I'm also a new market technician trying to get my name out there and help folks at the same time. CMT level 2 candidate. I use fundamentals to find the best companies I can. Then I put them in a list and wait for big time technical... More
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At the Money Charts
  • Is LinkedIn Telling Us To Buy Tesla Motors?  0 comments
    Apr 22, 2013 12:02 PM | about stocks: TSLA, LNKD

    This post title sounds crazy doesn't it? What does a networking website have to do with an auto maker?? How are their stocks related?? We'll get to that in a little bit. First, let's talk about analog charts.

    The idea behind analog charts is history repeats; therefore price patterns repeat. When you find a proper analog, you have a decent idea of what's expected in the future. I'm not a huge analog fan myself, but you can't ignore a great comparison when you see one.

    There is a clean comparison between these two charts. The interesting thing here, is that both stocks are so close together in time. So close in fact, that we probably can't call this a true analog. It's pretty interesting regardless!

    I highlighted several points of interest in the two charts to help show how similar the price action is. Let's dive right in and take a look at the LinkedIn chart.

    (click to enlarge)

    You can see the initial excitement reflected in price quickly after the stock went public. This was followed by a period of heavy selling causing disinterest in shares. During this time funds accumulated the stock while forming a great base. After the stock broke out of the base, it hasn't looked back since.

    The Tesla chart has followed the same basic principles over a larger time span. You have the initial excitement followed with just enough selling to make investors very leery of the shares. The large accumulation period followed and just this month we have this fantastic breakaway gap out of a base.

    (click to enlarge)

    The comparison is pretty eery, but in a good way. Let's keep in mind charts tell us about the stock's supply and demand. These companies are very similar as both have tons of institutional investor interest, high ceilings, and are positioned very well for future growth.

    Does this comparison mean TSLA will gain 50% from the break out in a couple of months? Maybe, heck it has already gained 20+% since breaking out. Well what can we get out of it then?

    • I do think it's safe to say TSLA is positioned very well for higher stock prices over time.
    • We can also use both of these charts for tracking highly hyped IPOs in the future.
    • Growth managers are treating these stocks the same; like they are leaders of the next few years.

    Thanks for taking your time to read this piece. I hope you enjoyed it. Have a great next trade!

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: TSLA, LNKD
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