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Can Tesla Rally Back to Its Prior Highs on Deliveries Beat?

On Friday Tesla delivered a beat on delivery estimates. With the stock dipping, can bulls muster the strength to buy?

Tesla  (TSLA) - Get Tesla Inc Report shares are down 6.5% in late Friday trading, a move that may surprise the bulls.

On Friday morning, the company reported a solid third-quarter delivery result. Tesla delivered 139,300 vehicles in Q3, topping analysts’ consensus expectations of 136,000.

More than 124,000 of those vehicle deliveries consisted of the Model 3 and Model Y. As for production, Tesla built just over 145,000 vehicles in the quarter.

Are we seeing a bit of a sell-the-news reaction? Despite strong results from Nio  (NIO) - Get NIO Inc. Sponsored ADR Class A Report, that stock is also down on the day, falling about 2% (although Its chart still looks solid).

Volatility has been the name of the game for Tesla stock as of late. After a massive run off the March lows and over the past year — up 508% and 772%, respectively — the shares have been wavering lately.

That has bulls confident that Tesla is simply consolidating, while bears are hoping the stock is on the cusp of a larger pullback. Let’s look at the charts.

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Daily chart of Tesla stock.

Daily chart of Tesla stock.

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Tesla shares surged into September, topping out around $500 before pulling back. It should be absolutely no surprise to investors that the stock extinguished its momentum as the stock split.

That is the type of sell-the-news action that we have seen in the past with this name. We may be seeing it now, too.

On the ensuing pullback from the September highs, Tesla stock found support at the 50-day moving average. After rallying and topping out near $450, it again found support at the 50-day moving average last week.

From last week’s low to Thursday’s close, Tesla rallied in five of the six trading sessions and tacked on a 27.6% gain. To see a bit of a pullback here is not surprising, particularly as Tesla didn’t blow away estimates and as the broader market swoons on a disappointing jobs report.

So where do we go from here?

It’s actually quite simple. Bulls need to see Tesla stock close above $450, opening the door to $500 and the prior highs. Above that and the 361.8% extension is possible, up at $517.63. To get there, markets will likely need to be in a “risk-on” state.

On the downside, a loss of the 20-day moving average puts the 50-day moving average back in play as support. Below that puts the $330 to $350 area on the table. If Tesla stock closes below $325, it opens up the possibility for a test of $275 and possibly even the 200-day moving average.