Tesla Motors Inc: This Chart Shows Where TSLA Stock Could Be Going Next

Tesla Motors IncTSLA Stock: Signals That Drive Share Price

I have had numerous requests to take a look at Tesla Motors Inc (NASDAQ:TSLA) stock and provide my opinion on where I think its share price is headed next.

My answer to these requests is this: Technical analysis is not a crystal ball. It provides a trader with signals that he or she can use to try and gain an edge. It can almost be classified as “art,” reading and evaluating patterns and signals that are open to interpretation. On many occasions, two analysts have come to two different conclusions looking at the same data.

I am going to be honest: I have a bullish bias toward Tesla stock due to the tailwinds being created by the equity markets hitting record highs daily. Below, I will attempt to outline the possible signals that could be used to create an objective opinion.

The following is a two-year weekly chart of TSLA stock:

Tesla Motors Inc NASDAQ Chart

Chart courtesy of www.StockCharts.com

At first glance, the above chart provides no catalyst for deciphering a possible direction for the share price. Shares are drifting within a large range. TSLA stock closed 2015 at about $220.00 per share and closed 2016 at about $240.00 per share. Compare that to today’s share price of $230.00 and it is easy to see that, regardless of the volatility, shares have really gone nowhere in two years.

The trend has been dominated by negative price action. Shares tend to trend lower over many months and then shoot back up over a short timeframe. This type of price action is not all that terrible. Bull trends tend to exhibit such tendencies, except with higher highs.

I had to look at a five-year monthly chart to gain a better perspective.

Tesla Motors Inc NASDAQ INDX

Chart courtesy of www.StockCharts.com

The longer-term chart provides some beneficial information.

Shares have been range-bound since peaking in 2014; they refuse to close above $270.00 by the end of each month. Similarly, the shares refuse to close below $188.00 by the end of each month.

If we were setting criteria to determine trends, that would be the first one. Shares of TSLA stock would need to close above $270.00 or below $188.00 by the month’s end to generate a signal.

On the chart, you will notice the lower panel labelled “MACD.” The MACD (moving average convergence/divergence) is a simple and effective trend-following momentum indicator. Line crossings are used to distinguish between bullish and bearish signals.

In December 2014, TSLA stock generated a sell signal when the monthly MACD crossed in a bearish manner. This signal effectively halted any sustained gains in the price. The sideways trading range developed as a result.

The second criteria to help discern trends would be for the MACD cross to confirm the trend. The current signal is bearish. A cross would be needed to switch to the bullish camp.

Coincidentally, if the share price does manage to close above $270.00 on a monthly basis, that would generate a bullish MACD cross—meeting both criteria.

The Bottom Line on TSLA Stock

TSLA stock is currently trapped within a range. Bulls and bears are keeping things interesting, as the stock experiences volatile trading but always returns to the median. Even with the bullish tailwinds caused by record highs, I cannot discern with little doubt the next direction of TSLA stock.

My advice on Tesla stock: investors should wait for the signals to confirm the trend before acting.

At that time, I’ll provide an update on Tesla Motors Inc.