Is Tesla Motors, Inc. (NASDAQ:TSLA) a $500 Stock?

Tesla MotorsOver the next couple of years, you could make triple-digit gains in one of the most innovative companies in America: Tesla Motors, Inc. (NASDAQ:TSLA).

No, it won’t happen overnight. But as I’m about to show you, a bull run in Tesla stock is almost inevitable. And before the move is over, we could see prices double, or more. Let me explain.

Tesla Motors, Inc. Could Create Next Wave Overnight Millionaires

Over the past few years, electric-car maker Tesla has become one of the world’s most popular stocks.

Elon Musk, Tesla’s founder, is a genius. Customers clamor for the cars. Investors have fallen in love with the “story.”

This has helped TSLA stock climb from $30.00 in late 2012 to a recent high of $275.00. But since reaching the milestone, shares have been stuck in neutral. For over a year now, Tesla has been bouncing between $200.00 and $275.00, making little progress in either direction.

Can Tesla stock break through this ceiling? Let’s take a look at the chart.

Tesla Motors Chart

Chart courtesy of

Tesla’s stock chart is starting to resemble a cup-and-handle shape; so named by technical analysts because it resembles the shape of a tea cup. It’s a bullish continuation pattern, where the upward trend has paused and trades down for a short period of time. But once shares reach a new high, they can soar higher in an explosive fashion.

This is how things appear to be playing out in TSLA stock.

  1. Rally: The cup-and-handle pattern is preceded by an upward move. Eventually, the number of bulls who can propel the stock higher is exhausted, and the stock begins to sell off.
  2. Cup: The security becomes lifeless for a period of time, bouncing up and down with no clear trend. Eventually, the stock is able to move back towards its previous high.
  3. Handle: In the final part of the pattern, the last group of profit-takers takes advantage of the higher prices to unload their shares. After a brief sell-off, there is no one left to unload new stock. The stage is now set for a big rally.

In the same way a dancer crouches before leaping into the air, stocks will often dip before making another move higher. Shares don’t usually shoot up from 50 to 500 in a straight line. At certain intervals they need to take a break, catching their breath before continuing the climb higher.

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These sell-offs, though frustrating to sit through, serve another important benefit. They shake out the weak and frightened shareholders who mistake this reaction for a drop. This enables the stock to advance more rapidly in the ensuing rally.

To back up the technical case, Tesla Motors also has a number of fundamental catalysts that could send shares higher. Tesla’s long-awaited Model X SUV will start delivery in a few weeks. Moreover, the company’s new affordable Model 3 is expected to be unveiled early next year. (Source: Model 3 and Model X to Send Tesla’s (NASDAQ:TSLA) Stock Price a Lot Higher, September 6, 2015.)

As my colleague Jing Pan wrote earlier this month, the two new models could give a big boost to Tesla’s stock price. ‘‘The company is well underway to become a big player in an industry that is currently dominated by internal combustion engines. […] If the company successfully breaks into the mass market with its Model 3, expect Tesla’s stock price to shoot through the roof.”

Tesla Motors Inc: An Unstoppable Game-Changer for the Next Decade

To be clear, this is not a buy recommendation for Tesla stock. To complete the cup-and-handle pattern, TSLA shares still need to break out above $275.00. Ideally, this should be done on a surge of volume, indicating the stock is under accumulation.

How high could TSLA stock climb? Once the new uptrend is underway, we could see shares hit $350.00, $425.00, even $500.00. It’s impossible to predict how far the market can go once overhead resistance is cleared.

But one thing is clear: don’t bet against Elon Musk.

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