Tesla (TSLA) has been stuck in a range since June of 2017, and it’s currently well below the high of that range.
Typically one would wait for the bottom of a range to buy support, or buy the breakout of the top of the range, but now may be a good opportunity to get in before the next test of the all-time high.
TSLA has had a stream of negative news over the last 6 months, and most recently that included missing its production targets on January 2nd. This sent the stock down as much as 10% that day.
However, that news didn’t push it below its December 2018 low. This is a sign of strength and suggests the bulls are still not wavering. The low also sits around its 200-day moving average.
Since that drop, TSLA has rallied along with the market, and it is now in a position to break above its positively sloped 50-day moving average.
TSLA has tended to respect its 50-day moving average, so if it can trade sufficiently above it, then a stop under it would represent a way to enter
TSLA on its way up to the top of its multi-year range around $380.
The premise of this trade is that if TSLA trades over $350, then it should not trade back under its recent 3-day consolidation low at $327.
For the more nimble trader, a stop under $340 would work, but this stop runs the risk of getting stopped out on a short-lived pullback which could easily happen.
The big picture in TSLA is that October 2018 set a major low. December’s market plunge only pulled TSLA back to its 200-day moving average around $300.
Now it’s poised to accelerate higher if it can break above $350.
Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation