Luxury electric vehicle maker
Tesla Motors (
failed to wow investors when it reported first-quarter results
last week. A sell-off followed that took the stock down to a
technically critical level.
#-ad_banner-#Purely looking at the numbers, Tesla did well:
Earnings per share (
) of $0.12 beat analyst expectations of $0.10. Tesla delivered
6,457 cars during the quarter, slightly beating its guidance of
6,400, and it produced a record 7,535 vehicles. The company stuck
with its previous full-year guidance for around 35,000 vehicle
In February, TSLA rallied on the back of news that the company
is planning to build a so-called Gigafactory to achieve economies
of scale in battery production. According to the company, The
Gigafactory "is designed to reduce cell costs much faster than
the status quo and, by 2020, produce more lithium-ion batteries
annually than were produced worldwide in 2013."
TSLA fully retraced this rally in ensuing weeks, but many
analysts seemed focused on the Gigafactory's progress during last
week's conference call. CEO Elon Musk said that plans for the
factory are on track and that the company will break ground on
the first two projects in June. Musk also said that Panasonic, a
well-known battery supplier, will be a partner in the
With all this positive news, why did the stock sell off to the
tune of 11% on Thursday?
It's possible some analysts were disappointed with the
company's outlook. It's also possible that a few large investors
decided the intermediate-term prospects for the stock have
somewhat leveled out, and that along with other momentum stocks,
it should be sold to raise cash, take profits or make room for
But taking a look at the charts, I see a bullish opportunity
On the 12-month chart, we see that with the sharp 30%
correction over the past two and a half months, TSLA has
essentially mean-reverted back to its early 2013 uptrend (red)
line. Importantly, this is a confluence support area, as it
coincides with the 200-day simple moving average (blue line). In
other words, for the medium term, it's easy to label this area as
a make-or-break level for TSLA.
On the next chart, note that after rejecting lateral
resistance earlier last week (red line), Thursday's selling took
the stock below its 100-day moving average (upper blue line) and
right to its 200-day (lower blue line).
Given the confluence area that TSLA has arrived at, it could
be ripe for at least a little short-term bounce before heading
lower again toward better support near the $150 area.
Action to Take -->
-- Buy TSLA at the market price
-- Set stop-loss at $175, just below Friday's intraday lows
-- Set initial price target at $194 for a potential 5% gain in
This article was originally published at
Tesla at a Make-or-Break Level -- Buy or Sell?