Tesla Motors Inc (NASDAQ:TSLA) stock has been on a tear since its early February lows. In fact, this is one of the most epic V-shaped reversals I have ever witnessed.
While I remain structurally very bullish on Tesla’s future as a leader in electric vehicle manufacturing, in the near-term, the five-week-plus, 70% rally looks increasingly exhausted, and Tesla stock is reaching a confluence of technical resistance.
Less risk-averse traders could look to leg into calculated short positions. More structural investors should be looking to buy the next dip in TSLA.
Tesla Motors is expected to unveil its next car, the Model 3, this month, which is likely one reason for the strong bounce in Tesla stock in recent weeks. Expectations for the Model 3 are running high; with a price tag around of $35,000 (before government subsidies) it should be Tesla’s first model for the mass market.
Aside from that, TSLA continues to enjoy cult status, if only for the allure of anything that Elon Musk touches, from Space X rockets to Gigafactories to self-driving electric cars.
Tesla Stock Charts
I am always amazed how little perspective most traders and investors seem to get, and the correction that Tesla stock underwent from the summer of 2015 into the recent February lows is but one example.
While TSLA is not out of the woods entirely in this correction, it is noteworthy that from last July into February, shares fell about 50% — a meaningful retracement by most standards. Those investors using multiple time frames for their analysis would have noticed that Tesla at its February lows fell to and successfully tested its 200-week moving average (for the first time ever) on the weekly multiyear chart below. TSLA stock then staged a strong bullish reversal right at this crucial level.
The bounce since then has been impressive, but also has brought TSLA into a layer of resistance that is made up of the former diagonal support line from 2013 and diagonal resistance from the 2015 highs.
To sustainably overcome this area, Tesla stock likely needs to consolidate for a while.
On the daily chart, we see that the diagonal resistance line connecting the 2015 highs also matches up with the stock’s red 200-day simple moving average. As a result of the sharp V-shaped reversal, the MACD momentum oscillator is now at very overbought levels.
Yes, this week, TSLA managed to marginally push past this layer of resistance, but the rate of change to the upside from recent weeks is unsustainable.
At the same time, this V-shaped reversal increasingly looks to have been an important bottom.
Active investors looking to buy TSLA stock will likely find a better risk-reward scenario in the $190-$200 area. This would constitute about a 50% retracement of the recent sharp multiweek rally, and also lines up with former horizontal support and resistance.
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