Tech stocks are on the move. And Tesla Inc (NASDAQ:TSLA) is capitalizing on the bubbly sentiment with a super-charged breakout. It’s been a long time coming and has the chance to kick-start an upswing that could carry TSLA stock back to its all-time high notched back in June.
If you’ve been waiting for an excuse to initiate bullish exposure in the Street’s favorite momentum darling, today’s pop is as good as any.
Pattern lovers have been all over the symmetrical triangle that has formed in Tesla over the summer. For a clean view of the formation look no further than the weekly chart.
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The pair of lower pivot highs and higher pivot lows created a converging trendline formation which appears to be breaking today. Many view this pausing pattern as a coiled spring, one with pent-up energy ready to boost buyers once resistance is finally breached.
Another characteristic of the pattern is the falling volume showing decreased participation as the triangle progressed.
The lower volume makes it that much easier to buyers to wrest back control once they decide to rush back in. Though I’m writing this mid-day, TSLA stock has already registered above-average volume so there’s no doubt we’re seeing heavy participation in the breakout attempt.
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The next two targets are easy to spot. Both $370 and $387 are the last two major resistance levels, so consider them potential profit-taking spots for Tesla’s advance.
The Tesla Trade
Since Tesla stock options carry such a hefty price tag, a spread trade seems the way to go. Buy the Oct $355/$365 bull call spread for $5. This sets up the potential to double your money if TSLA simply rises 2% over the next month.
The initial $5 cost represents the max risk and will be lost if the stock sits below $355 at expiration. The potential reward is also $5 and will be captured if the stock rises above $365 by expiration.
If Tesla somehow tumbles from here, consider exiting on a break of the $330 support level to minimize the damage.
As of this writing, Tyler Craig held bullish positions in TSLA. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.
