Key Takeaways
-
Tesla shares have surged since Donald Trump’s election last week, amid investor hopes that CEO Elon Musk’s close ties with the president-elect will benefit the company.
-
Trump has tapped Musk to co-lead a newly created Department of Government Efficiency, an agency tasked with reducing government expenditure and slashing excess regulations.
-
The stock broke out above the top trendline of a cup and handle pattern last week on the highest trading volume since early July, indicating the potential for follow-through buying.
-
Investors should watch key support levels on Tesla’s chart around $300 and $265, while monitoring a crucial overhead area near $400.
Tesla (TSLA) shares have surged since Donald Trump’s election last week, amid investor hopes that CEO Elon Musk’s close ties with the president-elect will benefit the company.
Trump on Tuesday tapped Musk to co-lead a newly created Department of Government Efficiency (DOGE), an agency tasked with reducing government expenditure and slashing regulations, two areas that may have a direct impact on the EV maker.
Advertisement
Advertisement
Tesla shares, which have gained more than 30% since the start of trading on election day, were down 1% at around $325 in afternoon trading Wednesday, after rising as high as $344 earlier in the day.
Below, we break down the technicals on Tesla’s weekly chart and point out key price levels worth watching amid the stock recent election-driven volatility.
Cup and Handle Breakout
Tesla shares broke out above the top trendline of a cup and handle pattern last week on the highest trading volume since early July, indicating the potential for follow-through buying.
Indeed, bullish momentum carried into Monday before sellers cashed in on some of the stock’s recent post-election gains during Tuesday’s trading session.
Advertisement
Advertisement
With the possibility for further news-driven moves, let’s identify several key support levels to watch during retracements and point out a crucial overhead area to monitor if the stock continues trending higher.
Key Support Levels to Watch
During dips, investors should initially track the $300 level. Bulls could look for buying opportunities in this area near near the psychological round number and a trendline that connects a series of peaks that formed on the chart between January 2021 and July last year.
A breakdown below this key technical level could see the shares revisit the $265 level, a location on the chart where the price would likely encounter support near the cup and handle pattern’s top trendline, which may flip from resistance into support.
Crucial Overhead Area to Monitor
If Tesla shares continue to accelerate higher, investors should monitor how the price responds around the $400 level. This area on the chart could attract significant selling pressure near a range of prices positioned just below the stock’s November 2021 all-time high (ATH).
Advertisement
Advertisement
Interestingly, this level also sits in close proximity to a measured moved price target that calculates the depth of the cup and handle pattern’s “cup” and adds that amount to the initial breakout point. For instance, adding $130 to $265 projects an upside target of $395, just below the $400 level outlined above.
The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.
As of the date this article was written, the author does not own any of the above securities.