Tesla stock is trying to rally following its sales update out of China. Is it enough to push the stock above a key level?
Tesla (TSLA) – Get Tesla Inc. Report stock looked strong last week before a painful one-day drop of 9.2% on Friday changed the stock’s short-term outlook.
The bulls looked to extend the stock’s winning streak to four days on Thursday, as shares were up more than 5.5% at one point. However, with the overall market decline pressuring shares, Tesla stock declined 0.9%.
The early rally came after the company reported solid sales data out of China, which proved to be a relief for many investors following the strict lockdowns Shanghai went through because of covid-19.
Further, UBS analysts upgraded the stock to a buy rating and assigned an $1,100 price target. Catalysts included a record-breaking order book and the additional production from Tesla’s new Austin and Berlin factories.
Cathie Wood has been a buyer of Tesla stock, but the bulls will need more than Ark & Co. to step up to the plate if they want to see a sustained rally from here.
Trading Tesla Stock
Daily chart of Tesla stock.
Chart courtesy of TrendSpider.com
We have pros and cons with Tesla stock. On the plus side, the stock did a great job breaking out over that brutal downtrend (blue line), holding $700 and putting in a higher low. Those are all three very clear positives.
On the flip side, Tesla is also below last week’s high after that brutal one-day dip and the stock remains trapped below the $750 to $800 area, which was prior support.
Bulls do not want to see prior support turn into current resistance, and that’s pretty much what we’re trying to figure out now.
If Tesla stock had stayed above the 10-day moving average, that would have been best for the bulls. Really, though, it must stay above $700. That has been a key level amid this year’s pullback.
Below $700 opens up the possibility that the stock trades back down to this year’s low around $620.
On the upside, clearing $795 gives the bulls the upper hand.
Not only does it put Tesla stock above this month’s high, it puts it back above prior support. That could hand a key level back to the bulls, while also opening up more upside.
Specifically, the 38.2% retracement would be the next upside target near $825. That’s followed by the very key — and very wide — area of $870 to $920.
In that zone we find a lot of key measures, including the 50-day, 200-day and 21-week moving averages, along with the 50% retracement of this quarter’s range.
Above that and $1,000 could be back in play, but I would expect some sort of pause in the first area ($870 to $920) before a rally to this extent would occur — assuming Tesla stock can get there.
