It’s time to revisit trader favorite Tesla Motors (TSLA) because, frankly, the way TSLA stock moves on a daily basis means there’s always a lot to digest after just a few days’ time.
On Tuesday, Nov. 26, I discussed about how TSLA stock had reached the upper end of a medium-term technical support level. I finished that day’s note with the following thought:
“Given the confluence zone support coming up for the stock, I will soon again be interested in playing TSLA from the long side, but first I’ll need to see a little bottoming confirmation by way of a tighter pattern and bullish candlesticks. I will update as we get closer to this point.”
In my best effort to follow up and walk you through the trade and thought processes behind them, let’s look at the following two updated charts.
First, note that after bottoming on Nov. 26, TSLA stock bounced, then consolidated for a couple of days, followed by a big one-day rally on Dec. 3, which confirmed the near-term bottoming process.
In recent days, TSLA stock has begun to inch up on the first next resistance area, which spans from about $152 up to $156 and is made up of the 50- and 100-day simple moving averages. This area will be a first test for TSLA since the Nov. 26 low, and if overcome, would open it up to the next resistance level above, near $172-$175.
To understand the $172-$175 upside target — beyond the $152-$156 resistance area — we need to zoom in on the chart of TSLA stock.
There we can see that the stock’s rally off the Nov. 26 low was followed by a seven-day consolidation period, which took the shape of a bullish wedge. On Thursday of this week, TSLA stock finally broke out of this wedge, targeting the aforementioned upside area, which is arrived at by adding the 28-point move from the Nov. 26 lows to the Dec. 3 highs, to the breakout area from Dec. 12 (around $142).
It’s not exact science, this price target-measuring exercise, but the point is to map out a target area rather than an exact dollar target.
So, with TSLA stock having established a good tradable medium-term low on Nov. 26, a next upside target closer to the low $170s comes into play, as long as the $152-$156 resistance area doesn’t prove to be too stiff.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.