Shares of Tesla Motors Inc (NASDAQ:TSLA), while still lower by close to 18% year-to-date, have shown good absolute and relative strength over the past week and a half. Although still not out of the woods just yet, TSLA stock is increasingly coiling up for a potentially better move to the upside.
Earlier this week, I met with a few client investors. Among other things, we discussed the importance of exercising patience in trading and investing. Tesla stock was one of the example stocks I discussed because although TSLA is beginning to look more technically sound for a next leg higher, it has been a painful equity for impatient traders expecting explosive moves (in either direction).
One of the best lessons I ever received from a former trading mentor was that sometimes there are simply no high-probability trades to be had in any given stock or index, for an extended period of time. Patience is a virtue both in life and in trading. The best traders I have met throughout my career have an uncanny ability to simply sit on their hands until the best probability trade flashes. Specifically, they let the stock price come to them (i.e., to their price levels of interest where they see a good risk/reward equation).
They don’t chase, and that would be my advice on TSLA stock.
TSLA Stock Charts
With that in mind, on Tesla’s multiyear weekly chart, note that since early 2014, shares have largely been stuck in a sideways (albeit sometimes volatile) trading range. TSLA has seen some over- and under-shooting of this range here and there.
But in the bigger picture, the stock is stuck in a wide trading range where dips were to be bought and rallies to be sold.
Over the past month or so, TSLA stock has once again found support at the lower end of the trading range, which currently also coincides with the red 200-week simple moving average. From a momentum perspective, we see at the bottom of the chart that the blue Relative Strength Index (RSI) indicator is slowly starting to turn higher as well.
While this all looks more promising, it’s no cigar just yer. I still need to see a better and stronger bullish reversal off the horizontal support area around $185.
When I last discussed Tesla stock on Nov. 28, I highlighted the very early stages of selling exhaustion and said that less risk-averse active investors could consider taking initial long positions in the stock against the $180 area as a stop-loss.
So far, this support area is holding, and TSLA shares have seen a new rally with a marginal high against the late November highs.
On the daily chart, we see that over the past couple of trading days, Tesla Motors attempted to break past diagonal resistance from the April highs. While the MACD oscillator at the bottom of the chart is also slowly curling higher, shares still are trading below their blue 100-day SMA.
As a general rule, better odds of trading stocks from the long side occur when a stock is trading above both its yellow 50-day and the blue 100-day SMAs, and those moving averages are sloping higher. So far, both moving averages are still sloping lower.
That said, the less conservative trader could still consider playing TSLA stock from the long side at these levels, using the $215 area as a next upside target over the next few weeks.
Any strong bearish reversal from here should act as a stop-loss signal.
Like what you see? Sign up for our daily Beat the Bell e-letter and get Serge’s investment advice delivered to your inbox every morning! You can also download his 6 Keys for Successful Trading and Investing.
