Tesla stock is popping on Monday on a bullish reaction to a stock split. Here’s the trade.
Shares of Tesla (TSLA) – Get Tesla Inc Report are bursting higher on Monday, rallying by more than 7.5% on the day.
Driving shares higher is a new filing from the company, which proposes a vote on another stock split.
Recently, Alphabet (GOOGL) – Get Alphabet Inc. Class A Report (GOOG) – Get Alphabet Inc. Class C Report approved a stock split earlier this year, while Amazon (AMZN) – Get Amazon.com, Inc. Report approved its first stock split since 1999 earlier this month.
In the case of Tesla, the company “will seek approval to authorize additional shares” and will vote on a stock split at its next annual meeting.
Generally speaking, stocks are met with a nice boost when a split is discussed.
Amazon has been on fire since announcing its split earlier this month. Alphabet rallied to all-time highs in February when it announced its split (and did so alongside strong earnings).
Remember when Tesla made the same announcement in the summer of 2020? Shares roared to all-time highs. Apple (AAPL) – Get Apple Inc. Report did too amid its stock split.
While it may not alter the value of the business, it’s hard to argue that it’s not a bullish event for the stock.
Trading Tesla Stock
Daily chart of Tesla stock.
Chart courtesy of TrendSpider.com
Going into the weekend, I was keeping a close eye on Tesla stock, because it was giving us back-to-back inside days on the daily chart.
An inside day is a form of consolidation, as traders look to generate a move in the continued direction. The fact that there were back-to-back inside days only means that the trading ranges were tightening even more.
A daily-up rotation would have created a continuation trade on the long side. A daily-down rotation would have created a shorting opportunity.
Today was different though. Tesla stock erupted higher on this morning’s news, gapping above last week’s high and the 61.8% retracement.
Shares made a push toward $1,100 but are now backing off this zone. If it’s able to clear this level, then we could see a further run to the upside. However, I expect it to hit some resistance in the $1,115 to $1,130 area.
In that zone, Tesla stock finds the 78.6% retracement of the current range, as well as prior resistance and downtrend resistance (blue line).
However, a push above this zone opens the door to $1,200.
On the downside, I’m watching $1,000 and the rising 10-day moving average as potential support.
