Tesla (NASDAQ:TSLA) is arguably one of the U.S.'s most controversial publicly traded companies, known for, among other things, its nosebleed valuation based not on profitability but rather on investor hopes that one day that will come. As well, the founder of the Palo Alto, CA-based electric automaker, Elon Musk is, without doubt, one of America's more 'colorful' corporate leaders.
Indeed, he has a reputation for making shocking statements, whether verbally or via via Twitter, including the now infamous August 7, 2018 tweet which said:
“Am considering taking Tesla private at $420. Funding secured.”
That little missive catapulted the stock higher by 13% in just one day and led to a lawsuit brought by the Securities and Exchange Commission that was ultimately settled with $20 million fines for both Musk and the company. It's also triggered an upcoming lawsuit in California, alleging Musk deliberately tried to manipulate the company's stock price. Subsequent rumors chalk up the tweet to Musk trying to impress his pop star girlfriend.
Whatever the reason, the resulting uproar pressured shares lower. And Musk turned that misfortune into a fortune by buying on the dip that followed.
Is Tesla a house of cards as many claim, an unsuccessful company built on the fantasies of a charismatic CEO? Or is it a visionary enterprise that just needs time to get its cutting-edge line of products out into the world, whereupon it will provide patient investors with exponential gains? Indeed, some analysts are targeting a long-term price for the stock of $7,000.
Though we can't project that far into the future, for now, based on our technical analysis, we forecast shares will retest their Feb. 4 all-time high of $968.99.
Trading completed a pennant, bullish following the stock's preceding jump. Shares of Tesla closed yesterday at $798.75, up more than 10%. The fact that this happened ahead of the company’s earnings report, scheduled for Wednesday, April 29, after the market close, adds significant gravitas to the move, which may project that informed money—investors close enough to the company to get an inkling of its Q1 2020 results—are optimistic about the results.
Of course, it could always just be that traders believed the company’s Fremont, CA manufacturing facility would come back online soon. However, plans for that were scrapped late yesterday as authorities extended the lockdown, sending the stock lower in afterhours. But, viola, the pre-market earlier had the stock back up, nearing $803, extending the rally from yesterday’s close, though it's now turned lower.
Still, we expect fluctuations. From a technical perspective, a decline is normal after a breakout, especially one such as this, with a 10.25% surge. From our perspective, a pullback would only afford a better entry for a long position.
Trading Strategies
Conservative traders would wait for a return move to retest the pattern’s integrity.
Moderate traders are likely to wait for pullback, for a better entry, not necessarily to seek confirmation.
Aggressive traders may enter a long position at will, provided they can first afford the long drop visible in the pattern via a return move.
Trade Sample
- Entry: $800
- Stop-Loss: $750
- Risk: $50
- Target: $900 – round number below the Feb. 19, $917.42 record close
- Reward: $150
- Risk:Reward Ratio: 1:3