Is TSLA’s breakout the real deal?

By Jani Ziedins | End of Day Analysis

Jun 01

Free After-Hours Analysis: 

It took a while, but TSLA finally broke away from $800 resistance. The stock first returned to this key level in late April but it has been suck drifting mostly sideways ever since.

As I wrote back in April, the first time we rallied to $800 was a great time to lock-in profits following a soilid breakout from $600. We only make money when we sell our best positions and anyone insisting on more than 30% over a couple of few weeks is definitely getting greedy.

The great thing about taking profits proactively is we can always get back in. When the stock held firm near $800 instead of hitting its head and retreating, that told us this was still buyable as long as prices held above $800. There were a few wobbles along the way, but whipsaws are part of this game and only a problem if we get discouraged and give up. The patient investor that stuck to their trading plan was finally rewarded with today’s nice pop. As the saying goes, better late than never.

Maybe this is the breakout we’ve been waiting for. Or maybe it is nothing more than a sympathy pop because Elon’s other company, SpaceX, made history this weekend after it safely launched astronauts into space. Either way, TSLA’s breakout is a good trade to participate in as long as we jumped aboard closer to $800 and have a stop near this level. In fact, those that have profits in this should at the very least move their stops up to their entry point, giving them a (mostly) free trade.

If TSLA’s strength was due to nothing more than a SpaceX sympathy plan, the air will probably come out of TSLA over the next few weeks and prices will retreat back to $800. If we bought right and moved our stops up, no big deal. It was a good trade and totally worth trying. That’s because the other possibility is a follow-on surge of buying that rechallenges $1k resistance. Win and we make money. Lose and we get out at our entry-level. Hard to argue with that risk/reward. While I don’t know if this breakout is the real deal, my trading plan has me covered no matter what happens next.

Looking ahead, if the stock rallies up to $1k over the next few weeks, that’s our chance to do this all over again. Take profits near the next resistance level and wait for prices to dip. If they don’t, then we have to greenlight to buy the next breakout.

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.