Tesla Inc (NASDAQ:TSLA) stock could either go gangbusters over the next few weeks or it could simply go bust. How’s that for non-commital?
See, Tesla shares are toying with a huge technical line in the sand extending back to 2014. This is the fourth distinct approach of the potential ceiling around $286, and though Tesla stock failed to hurdle the resistance with its first three efforts, this fourth try is starting out with a distinct advantage the first three swings didn’t have.
That is, it’s starting the run by blasting off a much higher launch pad. That just may be enough to make the difference. Or not.
Tesla Isn’t an Investment
It’s been said before (by yours truly), but it bears repeating: TSLA stock isn’t an investment, but rather, a trade based on a guess of how the market is going to collectively feel about the company six months in the future.
It’s becoming more investment-like, to be fair, now that consistent profits are at least on the radar and the recurring fundraisers seem to be slowing down as the company becomes more self-sufficient. It’s still mostly a trade, though, so reading the technical tea leaves remains an integral part of the game.
With that as the backdrop, the chart below tells the story quite clearly: Tesla stock has been range-bound since 2014. Trapped between $179 and $286, with a minor floor at $195 occasionally playing a role. Eventually, the ceiling at $286 is going to fail. Once that jailbreak happens, a flood of would-be buyers could jump in and forge the beginnings of a sizeable melt-up.
Click to Enlarge This may well be the beginning of that move.
What’s so distinctly different about the bullishness that’s materialized over the course of the past three weeks isn’t difficult to see; unlike the prior two ceiling attempts, this one didn’t result in a slide to the lower edge of the trading range. This one only peeled back to $242 (blue) before a floor was made. The three-week rally pushed up and off that support line.
It’s encouraging simply because rather than being forced to traverse the whole $107 span between $179 and $286 and then be expected to have enough gas in the tank to keep on truckin’, TSLA stock is only going to need to travel $44 before reaching the ceiling at $286.
There’s apt to be enough buying interest (and less profit-taking pressure) with that scenario than there has been with the other encounters with $286, setting up a possible breakout. If TSLA can just clear the ceiling, it could spark a move on the order of 100 points or so … roughly the same height of the well-established trading range it’s trying to break out of now.
Bottom Line for TSLA Stock
Obviously, there are never any guarantees. Tesla stock is a particularly funny bird to trade simply because everyone — professional and amateur alike — has a strong opinion on it. That kind of tension can pull the rug out from underneath any conventional technical analysis. The stock may simply bump into $283 and do what it’s done the past two times — rollover.
By and large, TSLA has actually behaved pretty predictably for the past several years — in terms of technical analysis — so it wouldn’t be crazy to put this potential trade on your radar. The company’s certainly got more going for it now, fundamentally, than it ever has before.
The one often-overlooked clue you’ll want to look for is better buying volume during and shortly after any break past $286. We don’t quite see enough bullish volume yet, though it could very likely materialize as TSLA stock approaches and then starts to clear the big technical ceiling.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.