Tesla (TSLA) shares were up 75% in the first half of this year and the move higher isn't over, it's just completing a period of consolidation before the next phase higher. Share were off more than $9 Tuesday afternoon.
The stock had been trading within intersecting uptrend and downtrend lines for the last three months, compressing range and storing energy for a potential volatile breakout. That breakout triggered last week and the stock moved quickly back up to the June high. The stock is down today over 2% at this point in the session, but all the technical indications point higher, and any pullback should be shallow and of short duration.
On the daily chart the pullback off the June high can be seen retracing 38% of the December 2016 and 2017 high range. The following period of oscillation around the 50-day moving average formed the triangle pattern, and last week's breakout occurred in the $360 area. The pattern projects an upside price objective measured by taking the height of the triangle then adding it to the breakout level, and it targets the $430 area.
Daily moving average convergence/divergence is overlaid on a weekly histogram of the oscillator and has been tracking higher on both time frames. These readings suggest positive short and intermediate-term price momentum. The vortex indicator which is designed to identify early shifts in trend direction, has made a bullish crossover. These price and trend momentum indicators are backed up by the money flow readings. Chaikin money flow is well into positive territory and the accumulation/distribution line is tracking above a rising signal average.
There are two important levels of downside support that could be tested before the stock resumes its rally. The August $370 high is the first likely level where the stock could bounce and below that would be the intersection with the rising support line drawn off the triangle lows.
Consolidation patterns help to recharge a stock's price momentum and generally resolve in the direction of the previous trend, and that's higher for Tesla shares.
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