Tesla Inc (NASDAQ:TSLA) stock could either go gangbusters over the next few weeks or it could simply go bust. How’s that for non-commital?
See, Tesla shares are toying with a huge technical line in the sand extending back to 2014.
This is the fourth distinct approach of the potential ceiling around $286, and though Tesla stock failed to hurdle the resistance with its first three efforts, this fourth try is starting out with a distinct advantage the first three swings didn’t have.
That is, it’s starting the run by blasting off a much higher launch pad. That just may be enough to make the difference. Or not.
Tesla Isn’t an Investment
[ad#Google Adsense 336×280-IA]It’s been said before (by yours truly), but it bears repeating: TSLA stock isn’t an investment, but rather, a trade based on a guess of how the market is going to collectively feel about the company six months in the future.
It’s becoming more investment-like, to be fair, now that consistent profits are at least on the radar and the recurring fundraisers seem to be slowing down as the company becomes more self-sufficient.
It’s still mostly a trade, though, so reading the technical tea leaves remains an integral part of the game.
With that as the backdrop, the chart below tells the story quite clearly: Tesla stock has been range-bound since 2014.
Trapped between $179 and $286, with a minor floor at $195 occasionally playing a role. Eventually, the ceiling at $286 is going to fail. Once that jailbreak happens, a flood of would-be buyers could jump in and forge the beginnings of a sizeable melt-up.
What’s so distinctly different about the bullishness that’s materialized over the course of the past three weeks isn’t difficult to see; unlike the prior two ceiling attempts, this one didn’t result in a slide to the lower edge of the trading range. This one only peeled back to $242 (blue) before a floor was made. The three-week rally pushed up and off that support line.
It’s encouraging simply because rather than being forced to traverse the whole $107 span between $179 and $286 and then be expected to have enough gas in the tank to keep on truckin’, TSLA stock is only going to need to travel $44 before reaching the ceiling at $286.
There’s apt to be enough buying interest (and less profit-taking pressure) with that scenario than there has been with the other encounters with $286, setting up a possible breakout. If TSLA can just clear the ceiling, it could spark a move on the order of 100 points or so … roughly the same height of the well-established trading range it’s trying to break out of now.
Bottom Line for TSLA Stock
Obviously, there are never any guarantees. Tesla stock is a particularly funny bird to trade simply because everyone — professional and amateur alike — has a strong opinion on it. That kind of tension can pull the rug out from underneath any conventional technical analysis. The stock may simply bump into $283 and do what it’s done the past two times — rollover.
By and large, TSLA has actually behaved pretty predictably for the past several years — in terms of technical analysis — so it wouldn’t be crazy to put this potential trade on your radar. The company’s certainly got more going for it now, fundamentally, than it ever has before.
The one often-overlooked clue you’ll want to look for is better buying volume during and shortly after any break past $286. We don’t quite see enough bullish volume yet, though it could very likely materialize as TSLA stock approaches and then starts to clear the big technical ceiling.
— James Brumley
Source: Investor Place