Shares in Tesla have raced higher after founder and CEO, Elon Musk, announced the possibility of a 'record quarter' for the electric car maker. While the company's share price has sunk more than 50% so far this year, some analysts believe a turnaround is coming - already helping to fuel a 28% surge in its share price in just seven days.
In this article, we explain what has caused the recent moves in Tesla's share price, as well as the possible trading opportunities around a potential turnaround in the electric car maker. Let's get started!
Tesla and Musk Impress at Company's Annual Meeting
Tesla's share price has been under pressure this year due to Wall Street's worry regarding the demand for Tesla's newest model. However, at the company's annual meeting, Musk stated that the company has a "decent shot at a record quarter on every level" and that "there is not a demand problem".
In fact, according to Musk, 90% of orders for the new Model 3 are coming from individuals who are not on the reservation list - suggesting the company is reaching new customers. However, while comments from the meeting were optimistic, analysts have pointed out that no hard evidence has been given for Tesla deliveries for the second quarter of this year.
Nonetheless, investors raced into Tesla shares helping them to log the biggest weekly gain since October 2018. However, with the company's share price still trading well below its September 2017 all-time high of $389, what's next? Let's take a look at what some analysts are predicting as well as the technical picture.
Tesla's Analyst Ratings
Investment banks such as Morgan Stanley, UBS and JP Morgan - among others - frequently disclose a target price for a stock and whether they believe it is a buy, sell or hold. These are called 'analyst ratings'. Currently, they vary wildly for Tesla.
In fact, according to Markets Insider, of 29 brokers surveyed the highest price target for the company is $530 and the lowest price target is $140. It's important to note that analysts can frequently change their ratings as new developments arise.
However, in this instance, it is evident there is a huge difference in opinion on the long-term price direction of Tesla's share price. This is also clearly shown in the long-term price chart of Tesla's share price as shown below:
Source: Admiral Markets MetaTrader 5 Supreme Edition, TSLA, Monthly - Data range: from Aug 1, 2012, to Jun 12, 2019, accessed on Jun 12, 2019, at 4:15 pm BST. - Please note: Past performance is not a reliable indicator of future results.
In the monthly chart of Tesla's share price above, it is clear to see the long-term trading range that has contained buyers and sellers. In fact, since 2013 sellers have struggled to break and hold below the $188 price level as shown by the black horizontal line. This is known as a support line and many traders would look to initiate long positions of this level based on what has happened in the past - even though it does not guarantee what could happen in the future.
However, if buyers do manage to take control of the market viewing the lower timeframes can be useful in identifying possible trading levels, as we discuss next.
How to Trade Tesla Shares
While Tesla's share price has already pushed higher from the horizontal support line around the $188 price level, the weekly chart shows there are still some obstacles that need to clear before reaching its all-time high price level of $389, as the weekly chart below shows:
Source: Admiral Markets MetaTrader 5 Supreme Edition, TSLA, Weekly - Data range: from Apr 3, 2016, to Jun 12, 2019, accessed on Jun 12, 2019, at 4:27 pm BST. - Please note: Past performance is not a reliable indicator of future results.
The blue line in the chart above is an eight-period moving average of price. During Tesla's share price collapse in recent months, the moving average acted as a resistance line where any pushes to the upside were rejected creating a move back to the downside.
Therefore, the first obstacle buyers need to clear is this moving average. If price can hold above it, then some traders will start to build 'long' positions. However, a move below the horizontal support line of $188 could see 'short' traders return to the market.
If Tesla can deliver on Musk's prediction of a record quarter, some traders will be looking towards the all-time high price level of $389 once again. Traders can take a long-term view through Admiral.Invest and also enjoy the ability to:
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