Tesla, Inc TSLA was trading about 2% higher on Monday morning after closing Friday’s trading session slightly lower.
The EV giant has been consolidating mostly sideways above $190 over the last three trading days, and Tesla’s consolidation appears to be taking place within a bull flag pattern.
The bull flag pattern is created with a sharp rise higher forming the pole, which is then followed by a consolidation pattern that brings the stock lower between a channel with parallel lines or into a tightening triangle pattern.
For bearish traders, the "trend is your friend" (until it's not) and the stock may continue downwards within the following channel for a short period of time. Aggressive traders may decide to short the stock at the upper trendline and exit the trade at the lower trendline.
Bullish traders will want to watch for a break up from the upper descending trendline of the flag formation, on high volume, for an entry. When a stock breaks up from a bull flag pattern, the measured move higher is equal to the length of the pole and should be added to the lowest price within the flag.
A bull flag is negated when a stock closes a trading day below the lower trendline of the flag pattern or if the flag falls more than 50% down the length of the pole.
Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.
The Tesla Chart: Tesla’s bull flag pattern was printed between March 20 and Friday, with the upward sloping pole formed between that date and March 22 and the downward sloping flag formed over the trading days that followed. The measured move of the pattern is about 14%, which suggests Tesla could rise toward the $214 mark on a break of the pattern.
- Tesla is also trading in an uptrend, with the most recent higher high formed on March 22 at $201.28 and the most recent confirmed higher low printed at the $167.01 mark on March 20. If Tesla breaks up from the bull flag pattern on Monday, Friday’s low-of-day will serve as the next higher low within the uptrend.
- The biggest level of resistance Tesla needs to clear, in order for a longer-term uptrend to take place, is at the $200 mark. The area is an important psychological level, and the 200-day simple moving average is currently trending there. The area is likely to act as resistance for at least a short period of time.
- If Tesla breaks down below the eight-day exponential moving average, the bull flag pattern will be negated and if the stock falls under $167, a downtrend could be on the horizon.
- Tesla has resistance above at $200.51 and $213.13 and support below at $190.41 and $177.59.
Read Next: Tesla, Amazon, Apple: These Options Data Reflections May Just Spoil Your Monday Morning Mood
Photo: Shutterstock
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
