Chart of the Day – $TSLA Breakout

by Enis April 1, 2013 1:14 pm • Commentary

At first glance I thought the news out of TSLA this morning was a cruel April Fools joke aimed at the 50% short interest in the shares, but the company stated that their Model S sales have exceeded previous expectations, and they actually expect to turn a profit in the first quarter.  The news sent TSLA up more than 20% at one point today, and it’s still up 16% as I write.

I actually had a bullish trade structure on TSLA that I took off last month for a profit when the stock stalled near the $40 resistance level.  My profit was nothing compared to what I would have made if I still held the trade today.  But hindsight is 20/20.  The stock could have been down 20% today and my options would be worthless.

Leaving the past in the past, what’s more important is whether there is a good trade in TSLA going forward.    

Here’s the lifetime chart:

Lifetime daily chart of TSLA, Courtesy of Bloomberg
Lifetime daily chart of TSLA, Courtesy of Bloomberg

The $40 level (annotated with a red line) was resistance in 2012 and 2013, and it gapped through that resistance level today, on its largest volume since the stock’s IPO (lower panel).  I anticipate that $40 will be important support going forward, as all of those who missed out on buying the breakout will look for an entry in the 40-41 level.  For now, the stock is in unchartered territory, and with on reference points, I have little inclination to initiate a new trade.  But if the stock does offer a pullback opportunity to near breakout support, I’ll be ready to put on another bullish TSLA trade.