Tesla surges 20% higher as Wall Street turns bullish. More to go?

October 25, 2019 11:30

For investors, Tesla is a stock you either love or hate. The narrative of a company producing luxury electric vehicles is a compelling investment opportunity in a world that is increasingly more sensitive to CO2 emissions. On the other hand, a company led by maverick CEO Elon Musk and zero profitability since the fourth quarter of 2018 heeds caution.

On Thursday 24 October Tesla shares soared more than 20% higher defying nearly all Wall Street analyst forecasts. Much of the street are now turning bullish, meaning now could be a very interesting time for the stock. Let's have a look at the details and the Tesla price chart in more detail.

Wall Street finally falls in love with Tesla

CEO Elon Musk provided a treat for investors during Tesla's latest third-quarter earnings announcement in a string of good news announcements.

Firstly, Tesla smashed earnings expectations out of the park. Wall Street estimated an earnings loss per share of -$0.24. Tesla produced a very healthy $1.86 earnings per share. While they did produce a lower revenue than analyst estimates they produced 97,000 vehicles in the third quarter which was above the lowest estimates of 95,000.

Secondly, Musk also announced that the company's new Shanghai factory was already in the trial production phase and would be ready for volume production in just a matter of months. According to Tesla, this will allow them to access the Chinese market at a lower cost while boosting vehicle sales internationally.

Thirdly, the company made its first profit in three quarters, helping the stock to its biggest spike since May 2013. While some analysts have started to raise their targets after this blowout quarter, others cite the lower revenue as a cause for concern.

So what is the chart of Tesla's share price telling us? Let's find out!

How to Trade Tesla Shares

With Admiral Markets you are able to speculate on Tesla's share price by using a product called CFD, or Contract for Difference. Essentially, this enables traders to go long and short on an instrument, using leverage.

Below is the long-term weekly chart of Tesla's share price:

Source: Admiral Markets MetaTrader 5, Tesla, Weekly - Data range: from 13 May 2012 to 24 October 2019, accessed on 24 October 2019 at 7:52 pm BST - Please note: Past performance is not a reliable indicator of future results.

In the long-term price chart above, we can see that overall Tesla shares have been rising higher in the long-term, albeit with some very wild swings up and down. On charts such as this, it can prove useful to draw on support and resistance lines to help identify who is in control of the market and possible turning points in the market.

A support line which can be plotted onto the chart of Tesla's share price is a trend line, as shown by the black diagonal line in the chart below:

Long-term technical traders now have a 'line in the sand' drawn and may stay long, or bullish, as long as price can remain above this long-term trend line. Shorter-term traders can use the same techniques on the lower timeframe. For example, let's look at the daily price chart of Tesla:

Source: Admiral Markets MetaTrader 5, Tesla, Daily - Data range: from 16 April 2018 to 24 October 2019, accessed on 24 October 2019 at 8:02 pm BST - Please note: Past performance is not a reliable indicator of future results.

In the daily chart of Tesla's share price above we can see that since May 2019, buyers have steadily been entering the market on the black diagonal trend line drawn on to the swing lows of the overall move higher. Traders may now wait for the market to reach this level again to identify possible long trades. Many traders would use price action trading patterns to help confirm a possible turn at the trend line.

Even on this daily chart, a 'line in the sand' has been drawn. Buyers may stay in control as long as the price remains above the diagonal trend line. Some traders may even be looking for Tesla's share price to eventually move back to the three highs made in 2018 around the $370 price level.

One thing is for certain - Tesla is now on the watchlist of many Wall Street institutions. Does it make it to yours?

One way to test your theories and trading ideas is to use a demo trading account which allows you to speculate on the markets with zero risk! Click the banner below to open your free virtual trading account today:

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

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