Long before the market began its sell-off in May, TSLA was heading lower.
The general market weakness certainly hasn’t helped TSLA’s stock price, but it may have helped set up this trade.
Read below to see why TSLA is at a level that makes it worth considering as a long.
As you can see in the chart below, Tesla (TSLA) has just bounced off the $180 level. This level has demonstrated support since 2014.
It formed significant lows around this level in May 2014, March 2015, January 2018 (exceed it but rebounded quickly), November 2016, and now it’s there again.
The way to play this is to consider your best stop as being under the low of this recent move $177. I’d round that down to under $175. However, I’ll discuss other options.
There are two reasons to believe the low is in.
First, the historical support of $180 that it has bounced from. However, to confirm that it has bounced it would be best to wait for a weekly close over $195.
The second reason to believe that the $180 level will hold is that the week ending 5/24 had unusually high volume. The following two weeks TSLA moved lower, but with average volume. This indicates that the massive selling should be over.
This is a big picture play. If there is a significant low put in, the chart suggests it could rally back to $250 quickly, and then to the 200-day average, which is currently around $290.
In summary, the trade setup is to be a buyer over $195, and while $175 is the level that it should hold, there is also good support around $185, so a good stop is also under $184.
Keep your eye on this one for more precise entry points with the big picture idea being that the low of 175 should lead to a $50-$100 rally.
Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation