Tesla Stock Charges Higher, Confirming Uptrend: The Bull, Bear Case

Tesla, Inc TSLA was popping up about 4.1% on Monday with continued bullish momentum after the company’s CEO Elon Musk signaled at Tesla’s annual shareholder meeting his willingness to explore traditional advertising.

Investors hope formal advertising could boost demand for Tesla’s models by showcasing features not available in other EVs. The news caused Tesla to resume its uptrend, which the stock negated on May 15 and May 16 by printing a lower low.

An uptrend occurs when a stock consistently makes a series of higher highs and higher lows on the chart.

The higher highs indicate the bulls are in control, while the intermittent higher lows indicate consolidation periods.

Traders can use moving averages to help identify an uptrend, with rising lower time frame moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term uptrend.

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The Tesla Chart: Tesla began trading in a fairly consistent uptrend on April 27, and on Friday, the stock signaled the trend will continue by forming a higher high above the May 12 high of $177.38. The rise also caused Tesla to regain the 50-day simple moving average as support, which may give bullish traders more confidence going forward.

• If Tesla closes the trading day near its high-of-day price, the stock will print a bullish Marubozu candlestick, which could indicate higher prices will come again on Tuesday. The second most likely scenario is that Tesla will trade sideways, forming a possible inside bar pattern, which would lean bullish for continuation later in the week.
• Eventually Tesla will need to retrace to at least print a higher low, which could provide traders who aren’t already in a position a solid entry. Traders can watch for Tesla to eventually fall lower and print a bullish reversal candlestick, such as a doji or hammer candlestick to indicate the higher low has occurred.
• When Tesla retraces, it may find support and reverse course from the 50-day simple moving average (SMA). If Tesla continues to trend higher, the stock will likely find at least short-term resistance at the 200-day SMA.
• Tesla has resistance above at $190.41 and $200.51 and support below at $177.59 and $166.71.

Photo courtesy of Tesla.