Last Friday I suggested buying $TSLA if it broke above $1700. The stock performed just as I expected it to, up more than 7% above that entry point. But I think there’s a lot more to go. Check out this update. (August 17, 2020)
TSLA
We are coming back to Tesla ( NASDAQ: TSLA ). Over the weekend (it was actually Friday night), I posted a video on Tesla ( NASDAQ: TSLA ) in our Chart of the Day and I am back here again. The reason is because my suggestion on Tesla ( NASDAQ: TSLA ) was because the stock was so close to 1700.00, the resistance here, it’s just that we have seen this thing struggle to get through several times. My suggestion was, rather than rush in to buy the stock because it’s going to break out respect the fact that this stock could sell-off again. Not in a big way but it could just maintain this pattern, and so I said wait until 1700.00. Now, I got some emails that told me I don’t know what the heck I’m doing and I don’t know, maybe you’re right; who am I to judge, I just do the best I can.
But today the stock, boom, broke out above 1700.00 and that wasn’t the top. You can see it ran up, wouldn’t it be nice if you could buy it at 1600.00? This is the way the stock traded today. It gapped up, 1680.00, and then just kept going. In no time at all it broke through 1700.00 and never looked back. Volume was very, very high. By the way, one point, if you are looking at volume and you should be, you should never look at volume in the middle of the day as an indication that maybe the stock is weakening or whatever. People are getting lunch here I know I am. So you look at almost any stock and you will see a lighter volume during the middle part of the day. What you are looking for as far as assessing the intraday strength of a stock is, during this lower volume day does the stock start drifting lower as if maybe there are just a few buyers that want to get in this stock. And when they leave for a while the stock comes down. Or does the stock just kind of go sideways like it has done here, which indicates that even during the low volume part of the day there is still demand for the stock? Particularly, since it ran up to 1800.00 and then stayed there.
So where do I think the stock is going to go? I told our members here, seriously, I don’t even know, it could beat Elon Musk to Mars. I am not a fan of Tesla ( NASDAQ: TSLA ). I have owned a Tesla ( NASDAQ: TSLA ) and I find their cars to be frustrating and sub-standard and the quality control is crap, it really truly is. And the service because they get overloaded, the people there are really super nice, they’re very, very nice and they really, really care but because they are so overloaded, at least the one in Newport Beach, you can’t get your car in there for a long time and then when you do they kind of fix it wrong because they’re so busy or their parts are back-ordered or something. It’s always like Roseanne Roseannadanna said “It’s always something.” So I am not a big fan of the car company. And if I have offended you, you know what? You will live with it because I will.
However, when it comes to the stock this is actually my biggest position now because I understand the price movement and that’s the main thing. I just mentioned to our members, don’t fall in love with a stock, just fall in love with a price pattern. If you fall in love with a price pattern that’s repeatable but if you fall in love with a stock, lord help you if you are falling in love with Boeing ( NYSE: BA ) or IBM ( NYSE: IBM ). I don’t know what IBM ( NYSE: IBM ) looks like but my point is, you fall in love with patterns. And I have seen this pattern a lot of times and I’m in love with it. So you see the stock broke out, it broke down here a little bit, it traded sideways then it broke out to the upside. But the issue that I had with it was, this 1700.00 level was right overhead and so, you’re are a chicken. No, I have just seen this a lot of times before. And that is if you are buying very close to resistance under the theory that it’s going to break out, what if it doesn’t? What if it pulls back one more time like it has several times before? If it pulls back one more time now you are holding a stock that you bought at resistance and you have got to hold it all the way down to see if support is going to hold. And so that’s no a good strategy.
My suggestion was, as you know; wait until it breaks above 1700.00. If it moves above 1700.00 that’s blue sky and you’re in. Well, that’s first thing this morning. So where do I think this stock can go? Let’s look at the weekly chart, the way this stock is trading, I’m being a real wussy here but I at least think the stock is going to get to 2000.00 before the split. Frankly, I think it can go higher. And once the stock does split, that is when you are going to have to really watch it; because a lot of times the increased liquidity, there’s going to be 5 times as many shares to trade. A lot of times that increased liquidity will actually cause a swoon in the prices because the whole reason why the stock kept going up so much was because there just wasn’t enough supply for institutions to get all they wanted and so their buying pressure pushed the stock up; it happens, seriously. But then once a stock splits, particularly if it’s more than just 2-for-1, I’ve seen 6-for-1, 7-for-1 splits and the stock still just kept going up. But you have to be aware that this many extra shares, the valuations the same, might make it so much easier for institutions to get their fill; because remember they’re hoping that Tesla ( NASDAQ: TSLA ) will be added to the S&P 500 ( INDEXSP: .INX ). It will be a lot easier to buy when there are 5 times as many shares.
So because of that, I think the most important thing with respect to this stock is to be watching how it trades after the split. As I look at the pattern here this stock has run 680 points, we’ll make it 600 points. Now that it’s breaking out I could see the stock running another 600 points up to say 2300.00. I like to be conservative on these measures because I like to look for minimum price moves so let’s look for 2300.00 before the stock settles down a little bit. That ‘s how I am looking at Tesla ( NASDAQ: TSLA ) and I think the stock has a lot more upside potential. And remember, I’m not a “Teslonian” or a “Musketeer”. I am just a fan of powerful charts and this is one of them.
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