How to Trade Tesla Stock as it Reports Earnings

Tesla has quintupled from the March low. Here's how to trade the stock with the electric-vehicle producer's earnings report on deck.
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We’re witnessing two industries in a veteran sector evolve: Tesla  (TSLA) - Get Report leads the electric-vehicle trend while many traditional automaker stocks struggle.

Despite recent volatility in the group, Tesla, Nio  (NIO) - Get Report and Nikola  (NKLA) - Get Report continue to trade well despite the rocky world economy prompted by the coronavirus.

While Ford  (F) - Get Report has been rebounding thanks to the introduction of its new Bronco, and as General Motors  (GM) - Get Report and Fiat Chrysler  (FCAU) - Get Report shares rise, the performances have been nothing like that of Tesla.

Now traders are tuning in to see whether shares of the electric-vehicle maker will continue to run to new highs after Tesla reports earnings after the close on Wednesday.

To prepare for Tesla earnings, follow Tesla Daily on TheStreet as the innovative auto company reports earnings after the bell Wednesday.

The company already delivered better-than-expected delivery results for the second quarter. Can it serve up another win for the bulls with its earnings?

Trading Tesla Stock

Daily chart of Tesla stock.

Daily chart of Tesla stock.

Take a moment to look at the stellar volatility we’ve seen in this stock. The shares tumbled 59% from the February high to the March lows, sending bears into a short-lived moment of rejoicing.

I must mention that Tesla is not worth trading from a valuation perspective. It commands a market cap close to $300 billion despite not having the fundamentals to support it. One day the valuation will matter, but that day likely won’t be tomorrow.

Because this stock is not bound by traditional fundamentals, let’s go with price action instead.

From the March low to the recent high, Tesla stock quintupled, topping near $1,795. The stock continues to hold up over the 10-day moving average as the bulls continue to dominate this name.

On the upside, see if Tesla can rotate over the current high near $1,795 and stay above that mark. 

If it can do so, it puts the 261.8% extension in play up at $1,969, followed by the $2,000 level. I know it sounds crazy, but so did the latest rally.

On the downside, a move below the 10-day moving average and two-times range extension could accelerate the selling pressure. 

In that event, I would like to see how the stock does near $1,300. There it finds the 161.8% extension and the 20-day moving average.

Below could force an eventual decline down toward the 50-day moving average and uptrend support (blue line) near $1,050. It could also put the breakout zone between $900 and $1,000 on the table.

With Tesla, traders need to go level by level and be aware of the trend. When it changes, so should they. 

Summer tends to be a pivotal moment for Tesla. Last year it was the bottom. In 2015, 2017 and 2018, it was the top. That doesn’t mean summer 2020 will matter, but it’s worth pointing out.