Shares of Tesla (TSLA - Get Report) have rebounded nicely off the early February lows. With today's nearly 6% surge, the stock is now up over 25% since it bottomed on Feb. 9. This impressive move has pushed shares back up to a major resistance zone near the 2015 lows.
In the near term, Tesla investors should expect a healthy pullback before this area is convincingly taken out. This process will produce a much lower-risk entry opportunity for patient bulls.
Tesla began 2016 with an ugly downside gap. The stock dropped nearly 7% on Jan. 4, completely reversing its Dec. 30 breakout in the process. The stock entered a devastating bear market almost immediately. During this selloff, Tesla sliced through its Aug. 24 spike low as well as major support near its 2015 lows. By the time shares reached the $141 area earlier this month, the stock had fallen over 40% from its December 2015 close. This move drove Tesla to a record oversold reading as per its weekly moving average divergence/convergence indicator. With the downside completely stretched, a healthy countertrend move was on the way.
Now that Tesla is nearing its 2015 lows, further upside may prove very difficult without a back-and-fill period. In the near term, investors should keep a close eye on the $181-to-$186 area as a potential intermediate top. A pullback from this zone will allow the basing action that began two weeks ago to strengthen. A key level of focus during a pullback is the stock's 40-week moving average near $160. A hold near this long-term support level would offer a very low-risk buying opportunity.