This week, Tesla CEO Elon Musk indicated that a new software upgrade would soon allow the company's vehicles to drive autonomously. Musk said the upgrade should be available by the end of this year.
Speaking via video at a Shanghai conference, Musk touted "Level 5", a software upgrade that would enhance Tesla's current autonomous capabilities. The current Level 2 version requires that drivers remain alert.
Tesla's recent rally is a result of a change in market perception. Formerly viewed as an auto stock, Tesla is now considered a tech stock. Such a change in perception can lead to huge gains, and Tesla is not the only stock that fits this description.
Does this news mean investors should buy the stock? Let's go to the chart to find out.
Tesla's had an amazing run, shooting from $900 to $1400 in just the past few weeks. Because of this, the stock is now extended far above its 10 day, 20 day, and 50 day moving averages (green, blue, and mauve lines).
If we look to the upper right hand corner of the chart, you'll see that I've circled three candles. Each of these three candles signifies either a reversal or indecision.
Notice also that volume, which was very high as Tesla gained ground, has slowed as the stock stalled over the past few days (shaded yellow). This is a good indication that institutions are not bailing out on this stock, they have simply paused their buying.
My interpretation is that, while Tesla remains a solid stock for the long haul, in the short term it is overdue for a mild pullback. That pullback could turn into a buying opportunity for investors.