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Will Tesla Stock Break Out From Ascending Triangle?

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Tesla, Inc. (TSLA) shares rose more than 6% in early trading on Wednesday after Tuesday’s annual shareholders’ meeting. Shareholders rejected two proposals that would have removed Elon Musk as chairman and changed the board of directors. Musk also told investors that the company was “quite likely” to meet its production goal of 5,000 Model 3s per week by the end of the month – a crucial production level for cash flow reasons.

Analysts have also remained largely positive despite the recent bad press. Baird analysts maintained the firm’s positive outlook on Tesla, saying that the company is likely to meet its operating cash flow and profit goals in the intermediate term, which could be a significant catalyst. The company’s release of another Model Y teaser photo also created some enthusiasm over the prospect of an all-electric crossover vehicle. (See also: 3 Things We Heard at the Tesla Annual Meeting.)

Technical chart showing the performance of Tesla, Inc. (TSLA) stock

From a technical standpoint, the stock has seen a strong rally since the beginning of the month and is approaching trendline resistance at around $311.00. The relative strength index (RSI) has been on the rise but remains below oversold levels at 61.26, while the moving average convergence divergence (MACD) continues to trend higher toward the zero-line. These indicators suggest that the stock could see greater upside over the coming sessions.

[Learn more about using supplemental technical indicators like the RSI and MACD to determine your trading strategy in Chapter 4 of the Technical Analysis course on the Investopedia Academy.]

Traders should watch for a breakout from trendline resistance at $311.00, which is the top of its ascending triangle pattern. If a breakout occurs, traders could see a move to the 200-day moving average at $323.12 or upper trendline resistance at $360.00. A failure to break out from the ascending triangle pattern could lead to a move back down to the 50-day moving average at $289.11 to consolidate before another attempt higher. (For more, check out: Tesla ‘Flattening Management Structure’ in Major Shake Up.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

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June 6, 2018

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