Electric vehicle-maker Tesla Motors (TSLA) topped earnings expectations in last Thursday’s report, and even though the current-quarter outlook fell short of analyst views, Tesla stock has since rallied more than 10%. That move has pushed TSLA above lateral resistance, putting shares back on track to move toward all-time highs sooner rather than later.
For the second quarter, Tesla earned 11 cents per share, beating analyst expectations of 4 cents, and reported $858 million in revenues to top the $811 million expected. For full-year 2014, TSLA said it remains on track to deliver more than 35,000 vehicles, and added that by the end of 2015, it expects to be delivering more than 100,000 vehicles annually.
The implied growth rate impressed investors, who in turn pushed Tesla stock higher last Friday, and every day this week (so far).
Before looking at the bullish charts of TSLA stock, my base case for U.S. equities (as laid out yesterday) is that we are in a cyclical topping phase where a strategy shift from buying the dips to selling or shorting the rallies and bounces makes sense. As such, when the pressure on the broader market is strong enough, most equities will fall along with the broader market. This could include growth and cult stocks like TSLA.
Until such time, however, the bullish charts of Tesla favor more upside.
Tesla Stock Charts
Looking at the weekly chart of TSLA, stretching back to late 2012, note that since the higher lows in late 2013, the stock has traced out a major narrowing wedge formation. This wedge formation so far this week is resolving to the upside (i.e., the stock is breaking out). A next logical upside target for Tesla stock is the February highs near the $265 area, or about 6.5% higher than Wednesday’s closing price.
On the daily chart, see that Wednesday’s 4%-plus rally, which came on the back of an analyst upgrade, pushed Tesla stock both past diagonal resistance (red dotted line) and horizontal resistance (black solid line). In May, TSLA found good support at its 200-day moving average (red line) and later in the month also quickly reclaimed its 50- and 100-day MAs. Ever since, the climb has been methodological and orderly.
Thanks to Tesla’s wide following, the stock typically takes a little breather after a few days of rallying before either resuming the climb or turning back around. And given the positive technical backdrop, I foresee TSLA potentially taking a little breather in the immediate term, but then steering toward its February highs and potentially above.
Active investors can now either buy Tesla stock on a little breather/consolidation or on a break past Wednesday’s highs.
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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.