Tesla TSLA has driven to an all-time high share price following its positive Q3 earnings report. TSLA rallied over 27% since the beginning of December, driving the stock to $422. The $420 level was a price that Tesla’s eccentric CEO and founder, Elon Musk, had claimed he would take the company private at, and critics laughed. Today this would be a discount to America’s favorite electric car company’s value today. TSLA has taken the financial markets by storm and defied an astronomical number of short-sellers.
The most significant catalyst to its most recent rally is the Shanghai Gigafactory 3, and its ahead of schedule-timeline, with cars being shipped out across China’s mainland as we speak. Tesla now has access to the world’s largest EV market, and the stock price is reflecting this.
The question we need to ask ourselves as investors is, has the short squeeze on one of the most shorted stocks in the market pushed this share price above its intrinsic value?
The answer is ambiguous at best, but we can get a better idea of what the market is thinking, by taking a look at both technical stock charts and prior expectations from TSLA bulls. We have been trading around its 50-day average (red line) for some time, but the stock’s most recent drive broke its way out of this range. Once traders gain their bearing next month, they will sell this stock back down towards its 50-day moving average.
Tesla investors and traders have been obsessed with this $420 price target ever since Musk announced his ostensible buyout at this valuation. This allegorical marijuana numbe has been a level held by the TSLA bulls. Hitting this price is a triumph for traders, and I believe it will also be a resistance level.
TSLA is historically quite volatile, with predictable support and resistance levels. I am confident that this $420 level is the new resistance level and is an excellent time to either exit your positions in this stock or even buy a $400 level put option for a January 17th expiration.
Tesla is still a robust long-term investment based on both its market leadership and progressively broadening global operations that are going to take this company and its share price to the stratosphere (past $500) …but the stock’s volatility, I expect, will remain.
As a TSLA bull, I will wait for this stock to fall back down to a price of around $300 to put a more substantial position on these shares in the coming months.
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