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TSLA Stock Rally Has Refueled the Momentum Train

Tesla shares break out of a multimonth consolidation pattern


Editor’s note: Technical problems caused yesterday’s “Beat the Bell” to appear in today’s email. Click here for today’s column, on SolarCity (SCTY).

Tesla Motors (TSLA) quickly raced to the top of my watch lists Monday after a strong start out of the gate. Tesla announced that it now expects to deliver its Model X SUV earlier than previously anticipated, and later in the day, we got rumors that Tesla, Nissan (NSANY) and BMW were discussing a shared charger network.

stock picking advice beat the bellAs a result, TSLA stock rallied almost 9% on the day in a technically sound move that every bull can appreciate.

Tesla now expects to deliver the Model X SUV in early 2015 as opposed to the previously planned delivery date sometime in the spring 2015. That’s a big deal, as just about any bit of news coming from Tesla these days is made out to be important — and keep in mind that perception is what counts in the markets. Not to mention (from a more fundamental perspective), the sooner the new car is available, the sooner revenues get booked.

After the close of trading yesterday, another bit of good news came for Tesla stock when New York Gov. Andrew Cuomo signed legislation that allows the company to continue operating its currently five retail locations in the state.

TSLA Stock Charts

In the broader sense, TSLA remains one of the biggest cult stocks despite the consolidation price action in recent months. Much like for Apple (AAPL), active investors and traders can use sentiment readings around the stock and match them up with the technicals to gain high-probability entry points on both the long and the short sides.

Near-term sentiment for TSLA stock became too negative in early May, just as the stock fell into its 2013 uptrend and the 200-day simple moving average (red line on the below chart).

How does one gauge sentiment in a cult stock? A simple way is to read reader comments below various articles on the stock. The more bearish the comments as a whole, the closer the stock is to an oversold bounce, at the very least.

Monday’s price action in TSLA stock violently broke it past the diagonal resistance line from late February, and barring any quick reversal of this move, the posture for Tesla shares has thus meaningfully improved for the medium term of a few weeks to a few months.

Tesla stock charts multiyear
Click to Enlarge

On the daily chart, Monday’s breakout rally came on a big spike in volume and also broke TSLA stock out of a tight bull flag pattern that formed in recent weeks just around the 50- and 100-day simple moving averages.

TSLA stock chart daily
Click to Enlarge

Simply put, the momentum of the move at this technically significant juncture now stands a good chance of keeping TSLA stock moving toward the $240-$260 area in coming weeks/months. Active traders and investors can use consolidation mini-moves to buy into Tesla.

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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.

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