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Opportunity and peril in Tesla’s stock are ahead.
Let’s explore the issue with a chart.
Chart
Please click here for an annotated chart of Tesla TSLA, -0.96% stock. Please observe the following from the chart:
• The chart shows a key psychological level of $300 drawn in white.
• The chart shows a support zone drawn in yellow around the key psychological level.
• The chart shows Tesla Whac-a-Mole. Lately when there is bad news for Tesla, buyers step in around $300, often driving the stock higher. In the past month, investors drove the stock to $357.
• The chart shows that Tesla’s stock is below the 200-day moving average. There is no magic by itself to the 200-day moving average. However, many investors believe that a stock trading below that level is bearish. Sometimes this belief on the part of a large number of investors becomes a self-fulfilling prophecy.
• As the chart shows, the volume spikes on down days. This is bearish.
Read: This surging stock looks like a promising bet on electric cars — and it’s not Tesla
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Believing the technicals
Traditional technical analysis does not work as well as it used to. For the reasons, please click here.
Technical analysis should always be supplemented with other means. As an example, the ZYX Change Method has six screens. Only one of the screens is technical analysis. Only 50% of the technical analysis screen comprises traditional technical analysis. The other 50% consists of new, innovative algorithms that give investors an edge. Investors need an edge to succeed in the long run.
Fundamentals
Tesla primarily trades on technicals and sentiment, not on fundamentals. The highest value we have been able to assign Tesla at The Arora Report based on the quantitative screen of the ZYX Change Method is $240.
Also see: Tesla’s stock is still a “sell” at Goldman Sachs
What to do now
The probability is high that Whac-a-Mole will occur again. However, those holding or buying Tesla should be mindful of the support zone shown on the chart. If the support zone is broken, investors should be prepared to take defensive action.
Investors may want to watch FAANG stocks. FAANG stocks are Facebook FB, -2.56% Amazon AMZN, +2.69% Apple AAPL, -0.03% Netflix NFLX, +1.28% and Google GOOG, -0.19% GOOGL, -0.39% How FAANG stocks behave will likely spill over to Tesla’s stock.
Disclosure: Subscribers to The Arora Report may have positions in the securities mentioned in this article or may take positions at any time. Nigam Arora is an investor, engineer and nuclear physicist by background who founded two Inc. 500 fastest-growing companies. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be reached at Nigam@TheAroraReport.com.