Tesla. Bullish but... can you handle the volatility?

Tesla, definitely bullish after beating the production estimate. The price went up 13% yesterday.

If a trader can make a profit just by chasing bullish candle/price action, then all of us would be a billionaire. Unfortunately, life isn't that simple.

We have to account for any possibility of a price drop. Theoretically, the trend will still be considered up, even if the price drop, as long as a higher low is maintained.

The previous swing level is at 885 which is a whopping 26% drop from the current price. This is the maximum retracement price can fall while still maintaining a theoretical uptrend. Hence, if you cannot handle this 26% swing in price, then chasing Tesla at its current price may not be wise for you.

For those who are willing to risk a 26% drop, you might have to reduce your lot sizing drastically. And this is something traders with small accounts might not be able to afford.

Verdict: Bullish price action... but whether you can take a long position depends on if you can handle a 26% drop