Tesla Is Poised for a Rally, and You Should Buy This Stock Soon

Comprehensive technical analysis shows that Tesla (TSLA) shares have nearly finished their recent decline.
By Ken Goldberg ,

Tesla (TSLA) - Get Report stock is preparing to make a move higher. Will you be ready for it?

It has now been 14 months since Tesla logged its all-time intraday high, and four months since it came close to reaching that high again. The mostly sideways price action since February 2014, when the stock first breached $200, now appears nearly complete.

As the weekly bar chart below shows, the horizontal yellow bar has marked six reversals since 2013, and it's about to be tested again. Any near-term weakness into the yellow bar will offer another buying opportunity. It may be the final such opportunity before the company shares launch a big rally.

Click here to see the following chart in a new window

From the bright green oval in the stochastics pane, which has just caught the most recent swing from overbought to oversold, to the bright green oval in the price pane that is about to hold out its loving arms to catch any near-term price decline, the coming retest of the $180 +/-$5 zone is setting up as the best buying opportunity since the test of $120 back in late 2013. This level includes the lower two-standard-deviation band, which contains 95% of normality. Although we can't yet rule out a break of this huge support zone, by a spike toward the three-standard-deviation band or the four-standard-deviation band, the decision support engine is warning that short-sellers with profits should use buy stops at the $230 level (the blue 200-day moving average line) to avoid being caught in a bear trap.

The decision support engine has also highlighted a lower bright green oval that would become the biggest "back up the truck" buying opportunity since Tesla's initial public offering, if some news arrived to justify that alternative forecast. Keep in mind, however, that this forecast has a much lower probability; we just can't eliminate it completely until the stock tests the $180 +/-$5 zone, reverses and rallies up and away from the yellow bar. 

If you have flat exposure to this stock, use the $230 level to establish a long position, and make additional purchases upon breaks above last month's $270 swing reversal high, or upon a test of $180. If you're already long this stock, you can use these parameters to add to your position. 

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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