Tesla Is Charging Up for a Fresh Rally

Tesla shares continue to sell off, setting up a low-risk buying opportunity for patient bulls.
By Gary Morrow ,

Shares of Tesla (TSLA) - Get Report are selling off again today. The stock is down just over 3.25% as it extends Monday's 3% loss. This two-day flush has pushed Tesla down to the upper band of a very solid near-term support zone. For Tesla bulls, the recent weakness provides a low-risk entry opportunity. If the stock can bottom near current lows, a fresh rally could quickly take hold.

Last week, Tesla was unable to penetrate its 200-day moving average despite a big surge in volume. Last Wednesday, the stock ramped more than 11% on its heaviest upside trade of the year following better-than-expected deliveries in the third quarter. This news-inspired move began with a huge upside gap, the stock's strongest open of the year. Since then, shares have been struggling with heavy resistance near the 200-day moving average. As the week progressed, the big-momentum jolt unleashed on Wednesday eased dramatically. The result is being felt this week as the stock retraces its delivery-inspired breakout.

For patient Tesla bulls, a low-risk buying opportunity is developing. As shares dip below the $217 area, a very solid support zone is being tested. The top band of this important zone includes the late October highs at the upper band as well as the key low set on Aug. 27. The lower band of the zone is marked by the huge breakout gap left behind on Nov. 4 at $214.45.

Investors should focus on this zone in the near term. A short-term base here would set the stock up for a retest of the 200-day moving average. A rally back to this long term indicator would take a 7.5% move from today's low.


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Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long TSLA.

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