TSLA Stock: Watching and Waiting Is Still the Best Course of Action
Making heads or tail of the direction Tesla Inc (NASDAQ:TSLA) stock is heading in next has probably been a frustrating ordeal. TSLA stock has been gyrating in each direction, and just as it seems like its ready to sustain a directional move, the stock makes a u-turn and powers the other way.
I chose to focus on Tesla stock because I want to outline the conditions needed for the stock to finally stage a directional move. At the moment, Tesla stock is trading at $348.55. In order to sustain a directional move, TSLA stock needs to break out of the trading range it has been contained within.
The trading range I am referring to is captured on the following TSLA stock chart.
Chart courtesy of StockCharts.com
The trading range highlighted on the chart above is defined by a level of price resistance, which resides at $390.00, and a level of price support, which resides at $245.00.
Price resistance was first established in June 2017 and has prevented the stock price from moving behind it ever since. Price support, on the other hand, was established in February 2017 and has supported the stock price ever since.
Tesla stock has been oscillating within this large $145.00 trading range for the better part of 20 months. In order to stage a directional move, TSLA stock will need to break out of it.
Breaking out above price resistance would suggest that a directional move toward higher prices is likely to follow. Breaking below price support would suggest that a directional move toward lower prices is likely to follow.
Let’s begin with price support at $245.00. Breaking below it is something investors would not like to see or endure. This price point is extremely significant and its importance is being reinforced by the fact that it currently coincides with the metric highlighted on the following stock chart.
Chart courtesy of StockCharts.com
This TSLA stock chart illustrates that the support outlined by the trading range currently coincides with the 200-week exponential moving average.
The 200-week exponential moving average is a simple metric that investment professionals like to use in order to determine if a stock is in a bullish state or a bearish state—much like a dividing line.
The significance of this weekly moving average is easily made obvious because Tesla has been using it as a level of price support since February 2016, when it was first tested. Since then, it has become a formidable level of price support and Tesla stock has never sustained consecutive closes below it.
This is why I can only assume that while Tesla stock is situated above this moving average, it is in a bullish state. Therefore, the trend remains tilted toward a bullish outcome.
This is also why, despite the challenges the company and Elon Musk have faced in recent months, I could not rule out that Tesla stock was still poised for further gains.
In order to rule out such a possibility, Tesla shares would need to break below the 200-week moving average on a sustained basis. Such an event would suggest that the stock has entered a bearish state. Therefore, lower prices would likely follow.
At this moment, TSLA stock is within striking distance of resistance. Given the current market conditions, the sheer fact that Tesla was able to stage an advance off of price support in October is a very impressive feat. I would love to say I know which way the trading range will be resolved, but unfortunately, this is something I do not have an answer for at this time.
Instead, I am taking a wait-and-see approach. When the trading range is finally resolved, I will have a much better idea of what TSLA stock is poised to do next.
I am watching the price action on the Tesla stock chart because the resolution of a trading range will determine whether or not TSLA stock is poised for further gains. Given the current turbulent market conditions, I suggest the best course of action is sitting on the sidelines, watching and waiting to see which way the trading range is resolved.