Surprisingly, over the last four months the share price of Tesla (TSLA) has outperformed the S&P 500 index by about 15%. The stock made a low in June and then quickly reversed direction climbing higher into July. A sudden downside gap reversed that upside momentum and took price back down to the $210 level. This was a 62% retracement of the June/July rally for all the Fibonacci fans out there.
Tesla’s share range continued to compress through September and is now approaching a critical juncture. An interior uptrend line has formed with support located in the $225 area. But above is a thick layer of resistance which spans the $250 to $242 levels. Additionally, just above this zone of resistance is the declining 200 day moving average.
What does this mean for the near term direction of the stock price? The takeaway is that the path of least resistance is to the downside. This does not mean that Tesla shares will not continue to test the zone overhead or that it won’t eventually break through that resistance. It does suggest, however, that if you caught the June low you might want to bank the gain. Then sit back and watch how things develop.
If Tesla’s stock price pulls back significantly you can reload, and if it breaks through the resistance zone you can quickly jump back in. In the meantime you have protected your profit.