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Tesla Stock Is Fully Charged for a Big Breakout

Chris Tyler

Tesla Motors (NASDAQ:TSLA) shares have stepped on the gas pedal and run over more than a few bears on the price chart this past month. But the technical case for hopping into Tesla stock today continues to look promising for bullish TSLA investors.

Let me explain.

Since blasting Street earnings views late last month Tesla stock has raced higher, while wiping out more than a few of TSLA’s bearish dissidents. By the numbers, shares are up 33% in just twelve trading sessions. And with short interest from mid-October at 29% of TSLA’s float, there has undoubtedly been some casualties along the way.

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The impetus behind TSLA stock’s bullish vroom, vroom has been the EV upstart’s surprise and surprisingly strong profit for its third quarter. And it probably didn’t hurt that the always-confident Elon Musk was quick to praise the results as an “incredibly historic quarter.” Yet despite the success, Tesla continues to have its share of bearish critics waving caution flags at TSLA. One such detractor is UBS.

UBS maintains a sell rating and $190 price target on Tesla shares and earlier this week questioned the validity of the company’s strong results. Analyst Colin Langan noted the TSLA’s 10-Q report showed the results received “unexpected help” from government credits and reduced warranty provisions buried in the footnotes and more than arm’s length from the spotlight earnings beat.

A Tesla spokesperson was quick to refute UBS’ findings as inaccurate. Furthermore, InvestorPlace’s Will Ashworth makes a solid case for why the analyst note “has no teeth” and why he sees TSLA stock as being worth a good deal more than even Elon Musk’s recent off-the-cuff $420 private takeout price.

Personally speaking, I’m still bullish despite TSLA’s price jump. And bottom-line, the squiggly line on the price may have a roadblock or two ahead, but after a brief pause at the charging station the oomph in Tesla stock looks ready to make a comeback.

Tesla Stock Weekly Chart

Tesla Stock Weekly Chart

Since writing optimistically about Tesla stock’s technical prospects nearly a month ago, shares have rallied strongly off a described key support zone backed by various Fibonacci and price levels. Admittedly, the speed of the move has been faster than anticipated. Nevertheless, Tesla’s bullish trend has been confirmed.

In the here and now, TSLA stock is in a testing position of angular resistance as shown in the provided weekly price chart. But in drilling down the technical action to the daily time frame, I’m optimistic.

Tesla Stock Daily Chart

TSLA Stock Daily Chart

The technical interpretation is that with two prior bearish gaps now filled and TSLA stock having had time to charge up sufficiently to power a successful breakout move, resistance can be overcome and TSLA’s uptrend reaffirmed with fresh all-time-highs in the days and weeks ahead.

If you’re a bullish Tesla stock trader, I’d look to buy shares if Thursday can follow-through on Wednesday’s push to relative highs. If Tesla shares are bought, I’d set an initial stop-loss below the daily chart’s three and five-day hammer candlestick or risk larger losses in a failed recharging effort counter to our technical forecast.

Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

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