Technical Analysis – Tesla’s crazy rally nears a make or break point

Christina Parthenidou, XM Investment Research Desk

Tesla’s stock price skyrocketed to a fresh record high of 498.07 on Wednesday, increasing its weekly gains to 15% due to strong vehicle delivery numbers.

The RSI, although well into the overbought territory, has yet to show signs of weakness, keeping the short-term bias strongly positive. Yet, with the indicator approaching a former resistance area, some caution should be taken unless the price clears the 500.00 level, shifting the spotlight next to the 520.00 and 540.00 psychological marks.

Should the bears retake control, the red Tenkan-sen line currently at 450.00 could come in defense once again. If not and the price retreats lower, traders could look for support near the swing low of 406.33 from December 30, while a deeper decline may reach a stronger obstacle around 380.00.  A decisive break of the latter would resume a neutral mood in the bigger picture, raising doubts about the sustainability of the uptrend.

Summarizing, Tesla’s upward trending stock price continues to face upside pressure in the short-term, but it is likely approaching the edge of the overbought territory near 500.00. Overall, the market is sustaining a positive outlook and only a drop under 380 would harm it.