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Buy the Tesla Dip as Elon Musk Sells the Rip?

Tesla stock plummeted at the open due to a tweet from Elon Musk. Here's how to trade it now.

Tesla  (TSLA) - Get Free Report stock fell roughly 7.3% shortly after the open, following worries that Elon Musk may sell a large chunk of stock.

The decline nearly matched the stock’s 7.5% premarket decline. In both scenarios, bulls bought the dip, with shares now down less than 2.5%.

Over the weekend, Elon Musk asked his Twitter  (TWTR) - Get Free Report followers if he should sell 10% of his stock as the political debates rages on about whether unrealized gains should be taxed.

Musk said he would follow the outcome of the poll, which as you can judge by Monday’s dip, favored selling some of his stake.

Musk is by far the largest owner of Tesla stock, institutional or otherwise. 

But let’s keep things in perspective.

First, he likely needed to sell some stock regardless of the poll to pay some of his taxes. 

Second, Amazon’s  (AMZN) - Get Free Report Jeff Bezos, Facebook’s  (FB) - Get Free Report Zuckerberg, Microsoft’s  (MSFT) - Get Free Report Bill Gates and other prominent insiders have been selling billions of dollars worth of stock for years.

We don’t see those stocks being punished for it now do we?

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Trading Tesla Stock

Daily chart of Tesla

Daily chart of Tesla stock.

We have been incredibly fortunate with the trade in Tesla. Many were skeptical this stock would even get back to its prior highs near $900.

Because of the way the technicals aligned, readers of The Street were ready for the push to $1,000 a share, followed by the move to $1,120.

With this morning’s gap down, bulls were able to buy the opening dip near the 10-day moving average.

That was the reactionary trade. Now that it’s played out, we need to see if this rebound has legs.

If Tesla can take out Monday’s high near $1,200, we could see it retest the highs near $1,245.

Above that would open the door to the two-times range extension near $1,250.

On the downside, keep an eye on today’s low. Taking out that measure could leave the stock vulnerable to a larger fade and put the 21-day moving average in play.

As fun as it is to champion Tesla and ride the wave higher, keep in mind that at the recent high the stock was up more than 62% from the beginning of October. Further, it’s still up 82.5% from its mid-August low.

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