TSLA Stock: Objectives Are in Sight
My December 24, 2016 report “Tesla Motors Inc: TSLA Stock Chart Is Bullish Once Again” outlined developments which suggested that the corrective action that contained the price of Tesla Motors Inc (NASDAQ:TSLA) stock had finally run its course. That meant TSLA stock was set up once again to advance.
It didn’t take very long for my views to be vindicated, as Tesla stock appreciated in a straight line, and in short order. The price objectives of $270.00 and $310.00 that I laid out in that previous publication are now in sight.
These views that I generate from analyzing price patterns and signals is a form of investment analysis known as technical analysis. Technical analysis uses past price and volume data to decipher trends and forecast future prices, and is a very popular method among traders.
I have been refining my technical skills for almost two decades, and I have found that the two most important factors in trading are defining risk and setting an exit strategy.
Given that my price objectives for TSLA stock are in sight, this is a perfect time to outline how I would employ an exit strategy.
The following Tesla stock chart illustrates the pattern that provided the price objectives, and suggested that a bullish view was warranted.
Chart courtesy of StockCharts.com
It was in late November that I realized that a constructive pattern was developing on the Tesla stock chart. This constructive pattern was beginning to suggest that the trading action in 2016 had the makings of a healthy bullish trend.
Healthy bullish trends consist of an impulse wave that advances price, and a consolidation wave that unwinds any overbought conditions, and sets up the next impulse wave. The advance off of the lows highlighted in green in the above chart constitutes an impulse wave, and the trading action that followed, highlighted in purple, constitutes a consolidation wave.
On December 20, 2016, TSLA stock exited the consolidation wave in an upward direction. This action indicated that a new impulse wave was set to develop. The theory behind this wave structure is that impulse waves that are separated by a consolidation wave tend to mirror each other in terms of length.
It was this methodology that was responsible for the $310.00 potential price objective that I mentioned in my previous publication on Tesla stock. The $270.00 price objective was obtained by using the peak price of the initial impulse wave, which now marks a level of resistance.
TSLA stock is trading at $252.95, and these price objectives are now within sight.
The following Tesla stock chart illustrates the impulse wave that is currently under development.
Chart courtesy of StockCharts.com
The chart above illustrates that the advance has been orderly, and can be effectively defined by using an ascending channel. An ascending channel contains two identical upward-sloping parallel lines that define support and resistance. Tesla stock has been oscillating between these these two trend lines since early December and, as long as TSLA stock remains within the channel, the trend toward higher prices will continue.
I would use this ascending channel to define my risk and produce an appropriate exit strategy. A break below support outlined by the ascending triangle would suggest that this advance in Tesla stock is running out of steam, and that a correction is likely to ensue. I would use a break below support to exit and/or reduce my position. If the stock continues to oscillate higher, I would use the projected price objective obtained by the wave structure, and be looking to lighten up at $270.0, and then exit the remaining position at $310.00.
Bottom Line on Tesla Stock
The current advance in stock has been linear, and the price objectives outlined by the wave structure are now in sight. It is time that I employ the appropriate exit strategies in order to abide to the rules that I originally set up after the TSLA stock chart suggested that higher prices were likely.