A Fresh Look At Tesla’s Chart: Up 71% In Just Weeks

By: Wayne Duggan

Tesla Motors Inc (NASDAQ: TSLA) shareholders have had quite a bumpy ride so far in 2016. Incredibly, after starting off the year with about a 40 percent dip down to around the $140 level, Tesla has rebounded and is now down only 1.7 percent on the year.

But how much technical damage did the big dip do to Tesla’s chart, and has the big bounce-back put it on a more bullish technical trajectory? Here’s a closer look at Tesla’s chart.

The Good News

The good news for Tesla bulls is that the stock’s recent surge has broken it above the downward-sloping resistance line that had been in place since mid-2015. The stock also had no difficulty re-claiming the $180 level, which had served as support several times prior to the stock’s 2016 swoon and could have potentially been significant resistance during the bounce-back.

It’s hard to believe that a stock can make a 71 percent push higher in a matter of weeks and not have a more bullish chart, but unfortunately Tesla’s January sell-off did a lot of damage to the chart.

The Bad News

Despite the big surge, Tesla has yet to eclipse its December high around $243. If it does so in coming days, that would be a bullish near-term development. Unfortunately, the prospect of a move above $243 seems unlikely in the near-term, as the huge rally has the stock’s RSI currently sitting above 74. At this overbought level, the prospect of a push above a previous resistance level is unlikely until the stock has consolidated for a while.

The Catalyst

At the end of March, Tesla will be unveiling its highly-anticipated, lower-price Model 3. This vehicle seems to be at the core of most Tesla bull theses, and its reception and market performance will be critical for the stock.

Traders should always be cautious of a “sell the news” outcome when a stock has pushed so high so fast leading up to such an important event. Expectations for the Model 3 seem to be through the roof. If the unveiling doesn’t exceed the lofty market expectations, traders will likely take the opportunity to book some quick profits.

If the stock does take another dive following the Model 3 event, the $140 support level from earlier in the year will be a critical level to watch. If the stock finds support above this level, it could actually be a bullish sign. If it dips below $140, that would be a very bearish development.

A longer-term chart shows that $120 is the only major support level between $140 and a huge drop to around $50.

Disclosure: the author has no position in the stocks mentioned.

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