Tesla Motors: Keep Trading TSLA Stock With the Longs

Advertisement

Shares of Tesla Motors Inc (NASDAQ:TSLA) rallied sharply on Thursday on the back of the Consumer Reports magazine assigning the Model S P85D the best rating it has ever assigned to a car.

Beat the BellOf course, Thursday’s broader market rally also helped the rally in TSLA stock … but throughout the entire corrective phase over the past week or so, shares of Tesla never broke any longer-term technical support areas.

This, accompanied by a still-believable growth story in the company should allow active investors to remain playing TSLA stock from the long side, particularly on dips.

To be clear (and to reiterate something that I have mentioned all week), when volatility in the broader markets spikes like it has over the past week or so, then correlation among stocks tends to rise further. When volatile markets strike fear in investors’ hearts, single-stock headlines becomes somewhat less important for near-term price movements.

That said, any positive news during oversold rallies — such as what we had in TSLA stock on Thursday — has the potential to act as a further boost in the near-term. When strong stocks however hold up well technically during market corrections, active investors and traders have further confirmation that once broader market volatility subsides, those very stocks will offer good risk/reward to trade to the upside.

TSLA Stock Charts

Looking at the multiyear weekly chart of TSLA stock, we see that the price since the autumn of 2014 has mostly oscillated in a wide range, as highlighted by the blue box. During the price correction of the past few weeks and even after Monday’s ugly intraday selling, Tesla shares managed to hold onto a support line that stretches back to 2013 and also hold nicely within this blue box trading range.

In other words, despite the technical damage done on the broader indices, TSLA stock did not see any greater breakdowns.

Tesla tsla weekly stock chart
Click to Enlarge

On the daily chart, we see that Tesla’s stock price action over the past few days looks similar to that of the broader U.S. stock market, but that the big breakdown moves seen on those indices is not reflected in the stock. Note that the sharp snap-back of recent days has pushed TSLA stock back above its 200-day moving average (red line) and right back below its 21-day (yellow line) and toward the diagonal resistance line from the July top.

Tesla tsla daily stock chart
Click to Enlarge

Active investors now have two choices:

  1. Buy Tesla stock on a break and hold above the $250 area for a move back toward $280 as an initial upside target.
  2. Absent a break past $250, look to buy dips in TSLA stock, as long as Monday’s lows around the $200 mark hold on a daily closing basis.

Like what you see? Sign up for our daily Beat the Bell e-letter and get investment advice delivered to your inbox every morning!

Successful trading and investing starts with a plan. Download Serge’s essential trading plan, The Essence of Swing Trading e-book. As of this writing, he did not hold a position in any of the aforementioned securities.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2015/08/tesla-motors-inc-tsla-stock-longs/.

©2024 InvestorPlace Media, LLC