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Tesla Finally Splits Its Stock - Are New Highs Next?

Tesla declares a 5-for-1 split, sending its shares ripping higher. If Tesla stock clears resistance, a test of the highs is possible.

Tesla  (TSLA) - Get Tesla Inc Report shares are rallying about 10% on Wednesday after the electric-vehicle giant finally declared a stock split.

After a jaw-dropping run in the face of the coronavirus outbreak, Tesla finally unveiled the 5-for-1 split, payable Aug. 28 to holders of record Aug. 21. 

The move comes ahead of what investors hope will be the stock's inclusion in the S&P 500.

Given the Palo Alto, Calif., company's $280 billion market cap and since it hit several key milestones in the most recent quarter, many are looking for the world’s largest automaker by market cap to enter the index.

Although nothing fundamental changes from the stock split, the bulls see the move as a positive as it may draw in more buyers.

From a psychological standpoint, it’s reasonable to understand why someone would rather buy 10 shares as opposed to two. 

From a financial perspective, it’s irrelevant, but from a psychological standpoint, it can stir up demand. It’s why so many are clamoring for Amazon  (AMZN) - Get, Inc. Report to split its stock, just as Apple  (AAPL) - Get Apple Inc. (AAPL) Report has recently agreed to do.

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Daily chart of Tesla stock.

Daily chart of Tesla stock.

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Tuesday’s action looked as if it was going to trigger a flush in Tesla stock. With Wednesday’s recovery, though, this name is showing all kinds of potential.

The shares are flirting with a move over multiple key levels, including the 20-day moving average and short-term downtrend resistance (purple line). More notable, though, has been the recent range.

Tesla shares have been bouncing in a tight range between $1,360 and $1,525. At $1,500, the stock has the potential to give bulls another run. 

Specifically, they will want to see a rotation over the key marks outlined above, as well as last week’s high at $1,527.41.

Over last week's high puts the prior week’s high in play at $1,564.70, followed by the two-times range extension near $1,587. 

Above that will certainly get the conversation going for another run at the all-time high, currently $1794.99.

But - there's a “but.” If these current marks hold up as resistance — that is, range resistance, the 20-day moving average and short-term downtrend resistance — then Tesla could retest the range lows near $1,360.

Below $1,360 likely puts the 50-day moving average in play currently near $1,265, along with the 10-week moving average just over $1,300.

A move below both of these moving averages could accelerate the selling pressure, but for now, the path of least resistance very well could be to the upside. 

That’s particularly true if Tesla pushes through nearby resistance.