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When Tesla Is a Buy-the-Dip Stock

Tesla has been very hot coming into the end of the year. That said, it's got bulls looking to buy the dip in the shares.

Tesla  (TSLA) - Get Tesla Inc. Report isn’t rising much Friday, but its gains during the morning were enough to send shares to new all-time highs yet again.

At this point, it’s not unlike Apple  (AAPL) - Get Apple Inc. Report. Both stocks continue to make new high after new high and are up more than 100% from their respective 2019 lows. Will either of them pull back?

For Tesla, we took a look at the stock’s long-term trends and levels earlier this week via a weekly chart. This time, we’ll use a daily chart to zoom in a bit closer for some of the more relevant short-term levels.

In both scenarios, the stock could really use a breather, allowing bulls to rest and muster up the strength to take shares higher. Let’s look at the charts.

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Trading Tesla Stock

Daily chart of Tesla stock.

Daily chart of Tesla stock.

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The chart for Tesla stock is pretty busy, but it’s also pretty simple. 

In June, shares bottomed at $176.99. From that level to Friday’s high, the stock is up more than 145%.

Covering at the bottom is as hard as selling at the top, and Tesla gave bears plenty of reasons to be short coming into summer. However, the short thesis took a serious blow when the technicals shifted in favor of the bulls. That happened in mid-June, when Tesla stock closed above downtrend resistance (blue line).

To add even more confirmation that bulls were now in the driver’s seat, the stock retested this downtrend mark a few weeks later and found it be support, not resistance.

In October, Tesla used its earnings report as a catalyst for a powerful breakout over $260. After reporting earnings, shares were trading in a well-defined channel (black lines). Tesla stock is no longer channel-bound, after breaking out more than a week ago and continuing higher.

The volume and relative strength have been impressive, but it can’t last forever. Tesla may persist up to $450 or even higher, but all it means is one thing: Bulls will be looking to buy the dip until bears regain control.

The first dip-buying level comes on the backside of former channel resistance, currently near $400. Either that or the 20-day moving average, whichever comes first. Below that and channel support will be in play, along with the 50-day moving average.

Tesla stock is going somewhat parabolic, so timing the pullback - both when it will happen and its depth - is very difficult. If Tesla breaks trend and thus loses its buy-the-dip status, bulls will need to be patient and wait for buyers to re-establish control.