Tesla Stock’s Next Move Is Dependent on This Key Indicator

Tesla stock
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TSLA Stock: Waiting on Bullish Momentum

I have my eye on Tesla Inc (NASDAQ: TSLA) stock because I am waiting for the creation of an indication that will act as a confirming signal suggesting that higher Tesla stock prices are in development.

For those who have not frequented my work in the past, let me quickly outline the method of investment analysis I employ to generate my views. This method of investment analysis is called technical analysis, and it is based on using historical data to speculate on what the future may bring. All this data is found on the company’s price chart, and as a result, the price chart is what I base all my views on.

Before I divulge the indication I am currently watching, let me outline the bullish backdrop currently influencing the price action in TSLA stock.

The indications creating the bullish backdrop in Tesla stock are highlighted on the following stock chart.


Tesla stock chart

Chart courtesy of StockCharts.com

The bullish backdrop I am referring to is illustrated on this monthly Tesla stock chart. It has been created by constructive price action and an influential momentum indicator.

Constructive price action consists of an alternating two-wave structure consisting of impulse waves and consolidation waves.

The impulse waves, highlighted in green, define the stage in a bullish trend where the stock makes a sustained move toward higher prices.

The consolidation waves, highlighted in purple, define the stage in a bullish trend where the stock price corrects and refrains from advancing. This corrective price action unwinds any overbought conditions created in the impulse wave that preceded it. This sets up the necessary environment where a new impulse wave can follow.

In April 2017, TSLA stock exited the consolidation wave and an impulse wave has been in development ever since. This wave has been supported by a bullish moving average convergence/divergence (MACD) indication.

MACD is a momentum indicator that is used to distinguish between bullish and bearish momentum. This indication is very influential because bullish momentum creates a path of least resistance geared toward higher stock prices, and without it, a stock cannot sustain an advance.

The MACD indicator remains in bullish alignment and TSLA is trading above the consolidation wave, implying that the backdrop is still bullish and, therefore, this stock is primed for further gains.

The indication I am currently watching, which will confirm that a move toward higher prices is in development, resides on the following weekly TSLA chart.

Tesla price chart

Chart courtesy of StockCharts.com

This stock chart illustrates that once resistance outlined by the consolidation wave was broken, it has become a level of price support that currently resides around $290.00.

Returning to test a previous level of price resistance is not uncommon and serves to reaffirm that the break above resistance was legitimate, while simultaneously establishing it as a new level of price support.

As long as TSLA stock is trading north of this level of price support, I can only assume that an impulse wave is in development.

I am currently watching the weekly MACD indicator located in the lower panel. The signal lines are converging and a bullish MACD cross would suggest that bullish momentum is influencing the price action in Tesla stock and would once again create a path of least resistance geared toward higher prices.

Once this indication is generated, I firmly believe that new highs in TSLA stock will follow.

Analyst Take:

The backdrop for Tesla stock remains bullish as the indications that created it continue to suggest that a bull market is in development. I am watching the MACD indication on the weekly TSLA stock chart because once a bullish indication is created, it is highly likely that higher prices will follow.