Chart of the Day: Tesla Soars in Premarket Trading; Techniques point too high
Although most mainstream automakers had a disappointing 2021 due to chip shortages hampering production and shipments, and rising inflation weighing on sales, Tesla (NASDAQ:) – still contrarian -current – took the fast lane.
After the Austin, Texas-based electric vehicle maker announced yesterday that it delivered 308,600 cars in the fourth quarter, lifting its annual sales to more than 936,000 vehicles, an 87% increase over the ‘previous year, the stock in pre-market Monday . Shares of TSLA are currently up more than 7%, trading at $1,134.68 at the time of writing. That’s a gain of nearly $80 just this morning.
The stunning performance makes Tesla’s fundamentals breathtaking in a positive way, but the stock’s short-term technicals look more challenging.
Shares are trading in a declining channel since the all-time high on Nov. 4. Can the bulls overcome the bearish pattern where the supply dominated the trend? The larger picture might provide an answer.
This larger view clearly shows that the daily declining channel is only short-term. In the longer term, the trend is clearly upwards. It is clearly defined in the ascending channel from the March 2020 low, supported by the 50 WMA.
Additionally, now that investors have moved up from the previous price of $1,126.50, traders have broken through the top of the downtrend channel, suggesting that the short-term price will now revert to the longer-term uptrend.
Conservative traders should wait for the price to confirm the breakout, retesting the top of the broken downtrend channel in the short term.
Moderate traders would wait for a drop in buying.
Aggressive traders could enter a long position now, according to a trading plan that takes into account his timing, budget and temperament. Here is an example:
- Admission: $1,125
- Stop Loss: $1,100
- Risk: $25
- Target: $1,225
- Reward: $100
- Risk-reward ratio: 1:4