Tesla Stock Charges Up For Another Tour North: A Technical Analysis

On Thursday, Tesla Inc TSLA broke up from a daily bull flag called out by Benzinga on Wednesday. On Friday the stock was consolidating the move by trading slightly down.

CEO Elon Musk, speaking from the Gigafactory near Berlin, Germany on Friday said he hopes to begin vehicle production at the plant in October. The manufacturing facility’s construction has been delayed multiple times already due to German bureaucratic hurdles and local public resistance. The environmental agency in Brandenburg has also not given its final stamp of approval.

Friday’s pullback gave options traders a chance to load up on bullish call contracts. One bull purchased 200 calls at $15.01 per piece with a $725 strike that expire Aug. 20. The trader paid $300,200 for the order.

The Tesla Chart: Technical traders can feel fairly confident Friday’s action is consolidation as opposed to a reversal to the downside because the pullback is happening on low volume. The pullback also allowed Tesla’s stock to cool down its relative strength index which was approaching overbought territory near the 70% mark.

A few days of more consolidation may be needed if Tesla closes Friday’s trading session with a shooting star candlestick. The shooting star candle at the top of a trend often indicates the price will fall further.

Despite the shooting star being potentially bearish for the short term, the upper wick of the candle allowed Tesla to make a higher high above $722. This indicates Tesla is trading in an uptrend despite trading lower.

Tesla is trading above the eight-day and 21-day exponential moving averages (EMAs) with the eight-day EMA trending above the 21-day, both of which are bullish indicators. Tesla is also trading about 8% above the 200-day simple moving average which indicates overall sentiment in the stock is bullish.

• Bulls want to see big bullish volume come in to Tesla’s stock to signal its consolidation phase is finished and for the volume to drive the stock up toward the $745 level. If Tesla can regain the level as support, it has room to move up toward $780.
• Bears want to see big bearish volume come in to Tesla’s stock to signal a new downtrend is beginning. If Tesla loses the $700 level it will have made a lower low on the daily chart. Below $700 there is support at $671 and $650.

Photo: Aidan Hancock on Unsplash