📌Tesla Quantitative Analysis: Oversold Conditions (MDD) and Relative Strength Index (RSI)
✔Oversold Conditions (MDD) and RSI: Brief Explanation of Indicators
Oversold Conditions (MDD): Maximum Drawdown (MDD) is a supplementary indicator that measures how much an investor’s assets have declined from the peak to the lowest point during a specific period. In simple terms, it shows how much the assets drop after reaching the highest profit during a particular timeframe.
- MDD is an essential metric for risk management. High MDD indicates significant potential losses for investors. Relative Strength Index (RSI): RSI is a supplementary indicator used to measure the price momentum of a stock, determining overbought and oversold conditions. It calculates the average of price increases and decreases over a specific period to indicate the relative strength.
- RSI values range between 0 and 100, with values above 70 indicating overbought conditions and values below 30 indicating oversold conditions.
📈Tesla Stock, RSI, and Maximum Drawdown (MDD) Chart
Tesla Quantitative Analysis: Utilizing MDD and RSI for Stock Prediction and Buying Signals Tesla Quantitative Analysis Indicators Tesla’s stock price declined from January 2022 to January 2023. The Maximum Drawdown (MDD) continued to decrease, and from January 2023 to May 2023, it remained stable without increasing. Subsequently, the MDD sharply decreased, and RSI transitioned from oversold to overbought, leading to a sustained rise in the stock price.
📈Buying Signal – Oversold Conditions
MDD declining and stable + RSI transitioning from oversold to overbought
📄Quantitative Analysis
The above signal is a crucial timing for buying the stock at its low point. Although January 2023 was the lowest point, there might be risks associated with buying at that time. Therefore, it seems favorable to consider buying in February 2023 when the RSI crossed above 30, eliminating oversold conditions, and the stock price is about to break the previous high or resistance.
July 2023 is an overbought zone, so it might experience a correction before further upward movement. Considering that the significant MDD indicates substantial price increases, if the Tesla stock breaks the $300 (approximately 380,000 won) level with strong volume, it could be a good time to consider buying. After that, if it surpasses $400, there is a possibility of significant price increase following the correction.
The electric vehicle industry is continuously growing, driven by the Korean battery stocks’ popularity and the increasing demand to reduce fossil fuel consumption due to climate change. Acknowledging that stock prices reflect future expectations, utilizing quantitative information can support stable trading decisions.
📈Utilizing MDD and RSI for Trading
- Using RSI Overbought and Oversold Zones: When RSI is above 70, it is considered overbought, indicating a selling signal, and when it is below 30, it is considered oversold, indicating a buying signal. This can be used to sell when the stock enters overbought territory during an uptrend and buy when it enters oversold territory during a downtrend.
- Utilizing MDD’s Decline for Buying Opportunities: When the stock shows a temporary downtrend and MDD is low, it can be considered a potential reversal signal for buying. If the MDD is small while the stock price approaches its lowest point, it can be seen as a buying opportunity.
- Strengthening Trend Following and Trading Signals: By combining trend-following strategies with RSI and MDD, trading signals can be reinforced. Utilizing RSI and MDD to assess the strength of a trend, one can apply a strategy to buy or sell based on the direction of the stock price during uptrends or downtrends.
Caution: RSI and MDD do not always provide accurate trading signals in all situations. It is essential to analyze them in conjunction with other technical indicators and make comprehensive decisions for trading. Also, as technical indicators based on historical data, past performance may not reflect future results, and careful consideration is necessary when investing.
*Disclaimer: This quantitative analysis is the subjective interpretation of the Quant team based on objective data. As its accuracy and completeness cannot be guaranteed, investors should make their final decisions based on their own judgment and responsibility. Therefore, under no circumstances can this information be used as legal evidence for the results of customer coin/stock investments.
-QuantPro