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Chart Of The Day: Tesla Shares Headed To $2,294

By Investing.com (Pinchas Cohen/Investing.com)Stock MarketsAug 17, 2020 09:50AM ET
www.investing.com/analysis/chart-of-the-day-tesla-shares-headed-to-2294-200534256
Chart Of The Day: Tesla Shares Headed To $2,294
By Investing.com (Pinchas Cohen/Investing.com)   |  Aug 17, 2020 09:50AM ET
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Shares of electric vehicle maker Tesla (NASDAQ:TSLA) notched a new record on Friday, closing at $1,650.71, after both Bank of America and Morgan Stanley upgraded their ratings on the Palo Alto, California-based car manufacturer.

Bank of America elevated the stock from Hold to Buy and Morgan Stanley, which had downgraded the stock in June due to the brewing US-China trade war, lifted its Sell rating to Hold. As well, Bank of America nearly doubled its price target to $1,750 from $800, reasoning that the higher the stock goes, the easier it is for Elon Musk to get low cost funding, whether the company meets all its production targets or not.

Adding to the stock's appeal, last week, Tesla announced a 5-for-1 split, which would make the increasingly expensive stock—which nearly quadrupled in value this year—more affordable for retail investors wanting to gain a stake in the company, something that tends to boost the stock further, on newfound demand.

Technicals not only support Bank of America’s new price level but imply a much higher target, $2,294.

TSLA Daily
TSLA Daily

Trading completed a falling flag, bullish after the $844 surge in the two weeks between June 29 and July 13. The reason the flag is falling? Happy traders cashed out.

But the upside breakout was made by new bulls, who also want to rake in the kind of returns made by early bulls. The topside breakout demonstrates that buyers are willing to up their bids to find new willing sellers at higher prices.

The flagpole—the jump before prices ranged within the flag’s body—is the implied target of the flag’s breakout. Therefore, a $644 climb from the $1,460 point of breakout suggests a price target of $2,294.

Beware, however, of Thursday’s High Wave candle—a sign of bewilderment—followed by a small Hanging Man, a potential setup for forced long liquidations, which would be confirmed with a lower close. Should confirmation follow today, it would suggest the high probability of a return move to retest the pattern, coinciding with the bottom of the rising channel.

A successful show of demand would propel the prices toward our targets.

Trading Strategies

Conservative traders should wait for proof the uptrend remains intact, via a pullback that successfully retests the integrity of the two patterns, the falling flag and the rising channel.

Moderate traders may wait for the presumed buying dip, but not necessarily wait for confirmation of trend.

Aggressive traders may enter a contrarian short, in an effort to capture the move down before joining the remainder of the market on the continued uptrend. It is advisable to wait for the Hanging Man’s confirmation.

Contrarian Trade Sample – Aggressive Short

Entry: $1,650 – upon a rally that follows a lower-closing Hanging-Man confirmation

Stop-Loss: $1,670 – above the Hanging Man

Risk: $20

Target: $,1550 – above recent congestion atop the $1,500 round psychological number

Reward: $100

Risk:Reward Ratio: 1:5

Chart Of The Day: Tesla Shares Headed To $2,294
 

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Chart Of The Day: Tesla Shares Headed To $2,294

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Comments (4)
Jan Skilbrei
Jan Skilbrei Aug 18, 2020 1:11AM ET
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thanks, elegantly written, the double bottom at support, was news driven (split), a return move probably requires markets correctons, or «new» news
Pinchas Cohen
Pinchas Cohen Aug 18, 2020 1:11AM ET
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Thanks, Jan.
Rosta Pilny
Raasta Aug 17, 2020 2:46PM ET
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1810-1850 is much better entry point. The pullback will be probably very fast. This volatility is pure harvest for intraday traders
Pinchas Cohen
Pinchas Cohen Aug 17, 2020 2:46PM ET
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There is no such thing a better entry point. Different entry points are better for different people, times and accounts. This is just a "sample."
Rosta Pilny
Raasta Aug 17, 2020 2:46PM ET
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You are right. I hoped for double top with a slight overshoot and I wrote my comment way later so it wasn't much of prediction from me. Wasn't meant to be a comparison with your sample.
Andre Benoit
Andre Benoit Aug 17, 2020 12:40PM ET
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Big brain call right there, good job pinchas
Pinchas Cohen
Pinchas Cohen Aug 17, 2020 12:40PM ET
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Thanks, Andre
Ryan Swiney
Ryan Swiney Aug 17, 2020 12:40PM ET
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pinchas, whats your advice on what Tesla will be at today?
Pinchas Cohen
Pinchas Cohen Aug 17, 2020 12:40PM ET
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Ryan Swiney  As a rule, I have no idea what will happen on a daily basis, the movements of which are called "noise." However, since global stocks and US futures are falling, it stands to reason that TSLA will dip as well. Per my analysis, yesterday confirmed the hanging man's bearish implications, increasing the odds for a return move.
Ryan Swiney
Ryan Swiney Aug 17, 2020 12:40PM ET
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pinchas, whats your advice on what Tesla will be at today?
Mot Andes
Mot Andes Aug 17, 2020 12:30PM ET
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I seriously dont know how somebody dare to name 2294 as target. This is such a massive bubble.
Pinchas Cohen
Pinchas Cohen Aug 17, 2020 12:30PM ET
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The technical presumption is that the flag pole will repeat itself.
 
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