Shares of Tesla (TSLA - Get Report) , as well as Daimler (DDAIF) , General Motors (GM - Get Report) and Ford (F - Get Report) moved higher Monday on the heels of a trade truce between the U.S. and China.
Tesla benefits more than GM and Ford from the positive strides between the two countries. On Sunday night, President Trump tweeted that "China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%."
So, unlike GM and Ford, which already produce a large number of vehicles in China thanks to the joint venture partnerships they formed years ago, Tesla doesn't produce its vehicles in the country. Instead, it ships them from the U.S., as it sells the Model S and X in China.
As trade tensions have escalated so far this year, Tesla has been caught in the crossfire, so to say. After China dropped the requirement for foreign automakers to use a joint venture partner to manufacture within the country, it quickly took to tariffs to match the U.S. tit for tat.
It left auto exporters like Tesla hurting, as demand suffers as prices rise. Without a way to substantially lower the cost to the end buyer, there isn't much of a solution at hand for the electric car maker. That is, until the company starts building its cars in China, something it's now working on in Shanghai.
In any regard, the latest trade news has been good for Tesla, which was rallying more than 3% on Monday to a key level near $360. With that in mind, let's see how we trade Tesla now.
How to Trade Tesla Stock
All year long, this $360 level has been stiff resistance for Tesla. It briefly topped this mark in August, barreling past $385 as bulls pushed it higher following its second-quarter earnings. But then CEO Elon Musk tweeted his intentions to go private, a controversy that weighed on the stock for the next few months.
Following Tesla's third-quarter earnings where it turned a profit and positive free-cash flow, investors again find shares rallying. This time, the stock is bouncing between $330 and $350 after a big move higher, threatening to resolve to the upside and squeeze bears even higher.
I'd be surprised if the short-sellers just gave up the $360 level without a fight. So on that note, let's see if the bears can keep Tesla below the $360 level. If not, the June highs near $375 are in sight and above that, the highs near $390 are on the table.
If the bears can defend the $360 level, look for a retest of short-term uptrend support (blue line) or $330 support. Should Tesla lose the latter of these two levels, a decline down to the $312-ish level could be in the cards, where all three major moving averages currently rest.