Monday every Tesla car on the road was built at the firm's Freemont, California factory. But that could be about to change. The firm is reportedly close to finalizing a deal to build a factory in a free-trade zone in Shanghai, a location that would produce cars for the fast-growing Chinese market.
China is a critical piece of Tesla's growth puzzle. That's because the country has strict electric vehicle mandates in place, and has already earmarked billions in funding for Chinese consumers to buy electric vehicles. The People's Republic is also home to a burgeoning population of wealthy car shoppers -- shoppers who bought more than $1 billion in Tesla Model S and Model X vehicles last year, and growing.
Meanwhile, Tesla remains the most heavily shorted stock in the U.S. market right now, as short sellers have trouble swallowing the hefty valuation that this stock currently trades for. The problem for shorts is that Tesla isn't looking shaky as shares hover within spitting distance of all-time highs.
Instead, shares are currently on the verge of a major breakout move to the upside.
To unpack that price trajectory this fall, we're turning to the chart for a technical look at Tesla's price action:
From a technical standpoint, Tesla has been forming a pretty textbook example of a bullish continuation setup for the last several months. The ascending triangle pattern in shares of Tesla is formed by horizontal resistance up above shares at $380, with uptrending support to the downside. Basically, as Tesla pinballs in between those two technically significant price levels, shares have been getting squeezed closer and closer to a breakout through the $380 price ceiling.
When that $380 breakout move happens, we've got a brand new buy signal in shares of Tesla.
Relative strength, the indicator down at the bottom of Tesla's chart, signals the potential for even more upside. That's because this relative strength gauge has been moving up and to the right, an indication that Tesla continues to outperform the broad market, even now. That statistically predisposes this stock to continue outperforming for the next three to six months at a minimum.
The final thing to consider in the Tesla trade is the possibility of a short squeeze. With almost a quarter of this stock's float being shorted, any upside catalyst could trigger a feedback loop of higher prices for TSLA as shorts cover their positions.
Simply put, Tesla may be expensive, but shares could get a lot more expensive in the short term. That's good reason to keep a close eye on $380 in the weeks ahead.
But not everyone is so optimistic about Tesla:
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.