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Tesla surges 28% in 7 days. Time to join the ride?

June 13, 2019 11:46

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.

Trading Tesla Shares

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.

Conclusion

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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INFORMATION ABOUT ANALYTICAL MATERIALS:

The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:

1.This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.

2.Any investment decision is made by each client alone whereas Admiral Markets AS (Admiral Markets) shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.

3.With view to protecting the interests of our clients and the objectivity of the Analysis, Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.

4.The Analysis is prepared by an independent analyst Jitan Solanki, Freelance Contributor (hereinafter "Author") based on personal estimations.

5.Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis.

6.Any kind of past or modeled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.

7.Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.


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