How Far Will Tesla's Technical Breakout Take The Stock?

When a stock breaks out to new all-time highs, it can be difficult for technical traders to predict how much follow-through a breakout will have. Tesla Inc TSLA breached its 2014 all-time highs and eclipsed $300/share this week, breaking above a $290 resistance level that had held the stock down for nearly three years.

However, without a definitive longer-term trading pattern in place, predicting just how high Tesla stock could go before it runs into resistance can be difficult.

Related Link: Barclays Analyst Still Says Tesla Is Headed To $165, Investors Buying Too Much Hype

One method technical traders often use to determine a new target price after a breakout is to look at the size of the stock’s previous trading range. For Tesla, the stock has spent the overwhelming majority of the last three years trading in a wide range between $180 and $290. Based on the size of that range, Tesla may ultimately be headed to $400, suggesting Tesla could have another 30 percent upside ahead.

Of course, traders should also be watching for signs that Tesla’s recent move could be a false breakout, such as the stock’s brief dip to $141 in early 2016. If the Tesla breakout is true, the $280-290 level should serve as support for the stock moving forward. A dip back below $280 would be an indication that the temporary spike may have been a false signal.