Tesla is probably the best-known electric car company in the world and whether you're a fan of their cars or not, there is no denying the performance of its stock price, which has risen over 850 percent in the last year.
With the UK government set to ban petrol and diesel cars from 2030 and other governments likely to follow, the fundamental outlook for electric cars in general and Tesla in particular looks decidedly bullish. From a technical perspective, there is also a case to have Tesla on the watchlist.
Looking at the monthly chart below, the recent surge in price is obvious. It's safe to say that there is an uptrend in play, with the moving averages (MA) all moving in the direction of the trend and bullish convergence on the MACD, although the RSI is slightly diverging.
Price is a little over-extended on this time frame and whilst that and the slight RSI divergence might be a concern if looking to buy and hold for the longer term, for a shorter-term swing trade this is not a major issue.
On the weekly chart, a clear uptrend has been established, with a defined series of higher highs and higher lows in place. The MAs are confirming the strength of the trend by displaying the “fanning” pattern, with the faster MAs over the slower ones, all moving in the same direction.
Moving our analysis down to the daily chart, price has made an all-time high, following on from a period of consolidation. Both the MACD and RSI are converging with price, implying that there is good trend momentum. Following on from the all-time high price has started to pull back, potentially to the area around the 10 and 20 period MA.
Based on the strength of this trend I will be looking for the price to pullback to these rising MAs and then a for a bullish reversal candle to form. If this occurs, and the price then breaks the high of the reversal candle, that would be my signal to enter a long position with a stop loss placed below the reversal candle.
Often, better trades occur when three or more timeframes are in agreement. What makes Tesla interesting at this moment is that agreement is in place across multiple time frames. In light of current conditions, I will be managing my risk carefully. I’ll look to close half of my position if a one-to-one risk-to-reward has been achieved and then move my stop up as any new swing lows forms, to lock in profit.
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