Tesla (TSLA - Get Report) stock is about to rally, according to comprehensive technical analysis. If you have sold short shares of the electric car maker, you should get ready to take your profits and establish a long position. And if you don't have a position in the stock, now is the time to buy shares.
Following is the weekly bar chart. Our objective decision support engine (DSE) analyzes this chart as well as the daily bar chart to develop forecasts. The DSE has been very accurate in predicting past moves by Tesla's shares, as we'll review below.
Our DSE identified the latest signal last week, and we shared it with members of our live-market Trading Room and DSE Alerts services on Friday.
Stochastics are nearly back in the green oval in the lower pane of the chart, and the corrective pattern off the $270 level is running out of steam. There's also huge support highlighted by the olive/gold line (the lower two-standard-deviation band, which controls 95% of normality) around $175, so the DSE is highlighting the $200 +/-$10 zone as the last time to enter the stock before it embarks on a move to new highs of more than $300.
Although a move into the $175 +/-$25 zone can't be completely ruled out, it's not required, because the conditions are ripe to fool the herd, which is becoming too bearish and certain of Tesla's demise, using the SolarCity (SCTY) deal as the reason.
The DSE forecast suggests that investors who have sold short the stock use the $200 +/$10 zone to take profits. If you've been waiting to establish or add to your long exposure, use this zone to begin buying, especially if you have a plan to add more when the stock is in the lower end of the zone. The blue arrows show the expected price path. Once the stock exits the upper boundary of the green box, new highs should follow this corrective process that has been in force since the September 2014 extreme.
As we noted, the DSE has yielded some excellent forecasts about Tesla in the past. Traders who heeded these forecasts were able to make some big profits. On Oct. 6, 2015, we published "Tesla Shares Are Headed for a Big Selloff." The stock's price closed that session near $240. Two weeks later, Tesla shares were testing $200, and by early February of this year, the stock's price had fallen to $140. Then, on Feb. 3 , we published "Tesla Is About to Bounce Back - Time to Buy is Now." This article warned that short-sellers should cover their positions, as "a bounce toward $210, if not $250" was expected.
The stock reached the $210 level on March 7, and then $250 by April 4. Then we published another DSE forecast in our May 20 article, titled "Tesla Motors Stock to Test $200 in Next Few Weeks," as the stock was bouncing to $220 after testing $205 the previous week. By June 22, shares touched $200, and then they bottomed the following week around $188. Later, on June 24, we wrote "Tesla Is Ready to Break Out: It's a Good Place to Hide From Brexit Woes." After closing that day around $193, Tesla experienced a near-straight line rise to $235 by Aug. 1.
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