by Serge Berger | January 15, 2014 7:56 am
On Monday, the 2014 North American International Auto Show kicked off in Detroit, causing some juicy moves in some of the auto manufacturer stocks. Yesterday, cult stock Tesla Motors (TSLA) rallied big in a technical significant move that led to a breakout on the TSLA stock chart.
Tesla announced that deliveries for the fourth quarter of 2013 sat at 6,900 Model S units, which is a notable 20% above the guidance that TSLA previously gave a few months back. Tesla also reiterated its aggressive growth strategy for 2014 as it looks to double its sales and service personnel, while noting that its Model S car is already the best selling car in Norway. TSLA also dismissed any concerns about its car batteries and said it welcomes competition in the electric car space.
In response, TSLA stock rallied a cool 15.7% to close Tuesday’s trading at its highest levels in just about two months (taking it from worst to first in InvestorPlace’s 10 Best Stocks for 2014 contest in a single day).
Of course, TSLA stock is no stranger to fast and furious moves — something anyone following Tesla in the past year has witnessed. At the same time, since TSLA stock began its massive vertical leap in early 2013, it also began to react well to technical analysis.
Like I discussed in my last note on TSLA stock on Dec. 13, following the big run-up, the October/November consolidation period was much needed. In percentage terms, the 40% correction from the October highs down to the November lows might seem high; however, considering the explosive 450% rally for TSLA stock in the prior seven months … well, a correction of that magnitude was healthy, necessary and essentially inevitable.
On the below chart, note that the November lows took place at a confluence zone made up of the 50% retracement area of the big run-up in TSLA, and the 200-day simple moving average (red line). Also note that with Tuesday’s rally, Tesla stock has now marginally broken past the diagonal resistance line from October, as well as above the 100-day MA.
On the closer-up chart, TSLA stock held important lateral support earlier this week, which also corresponded with a 50% retracement of the rally off the late November lows up to the December highs.
Tuesday’s big rally, not surprisingly, also came on a massive spike in volume, as the stock traded almost 28 million shares. TSLA stock pushed past a multiweek diagonal resistance point, as well as past the aforementioned multimonth diagonal resistance, which now sets the stock up to move toward the $172-$175 — a target range that I laid out on Dec. 13.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.
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