Looking To Trade Tesla Stock Following 3-1 Split? Here's An Updated Chart

Editor's note: The headline of this story has been updated to correct an error in the Tesla stock split figure. 

Tesla, Inc TSLA Inc was trading mostly flat on Thursday following a 3-1 stock split. The split brought shares of the electric vehicle giant down from Wednesday’s closing price of $891.29 to a split-adjusted price of $297.09.

Volatility in the premarket on Wednesday caused Tesla’s stock to open slightly higher at $302.36, and after the market opened the whipsaw action continued, causing Tesla to bounce between $293.14 and $302.96 within the first 30 minutes of trading.

The stock split means that every shareholder received two additional shares for each share of Tesla they owned. The split made shares of Tesla more attractive to retail investors and for options traders, and the price of both calls and puts has also become more affordable.

Unlike the last time Tesla split its stock, the company didn’t run up higher into this event, which Benzinga called out on Aug. 17. This may have surprised investors: when Tesla announced its last stock split on Aug. 11, 2020, the stock ran 81.29% higher into the event. In 2020, general market conditions were bullish compared to this year when the S&P 500 is experiencing a bear cycle.

The patterns Tesla developed on its chart prior to the split taking place are still intact, although technical traders will need to adjust their levels of support and resistance now that Tesla’s stock price has essentially been divided by three. 

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The Tesla Bull Case: Tesla may have developed a large cup-and-handle pattern (green) on the daily chart, with the cup formed between April 22 and Aug. 4 and the handle printing over the days that have followed. If the pattern becomes dominant, the measured move is about 46%, which indicates Tesla could charge up toward $430.

• Bullish traders can watch for Tesla to possibly break up above the upper descending trendline of the handle formation on higher-than-average volume to indicate the cup and handle pattern was recognized.
• The handle of the pattern is also a symmetrical triangle and within the formation Tesla has been making a series of lower highs and higher lows. Tesla is set to reach the apex of the triangle on about Sept. 7, and if the stock breaks up from the pattern on higher-than-average volume, an uptrend may occur.
• Tesla has resistance above at $300.90 and $315.42.

The Tesla Bear Case: Within the handle of the cup-and-handle, Tesla could be forming a bearish head-and-shoulder pattern (yellow), with the right shoulder formed between July 29 and Aug. 11, the head created between Aug. 12 and Aug. 23 and the left shoulder beginning to form over the days that have followed.

If the bearish pattern is recognized, the measured move is about 10%, which suggests the stock could fall toward the $255 level.

• Bearish traders will want to see Tesla break down from the ascending neckline of the pattern on higher-than-average bearish volume to indicate the head-and-shoulders was recognized, which will also throw Tesla into a downtrend on the daily chart.
• Both bullish and bearish traders will want to watch how Tesla continues to react to the 200-day simple moving average on the daily chart. If the stock is below the level, Tesla is in a bear cycle, and if the stock is able to regain the area as support, a bull cycle could be in the works.
• Tesla has support below at $285.83 and $271.71.

Photo courtesy of Tesla.