How to Trade Tesla (NASDAQ: TSLA) Stock Right Now

Today we’ll walk you through a trade idea with Tesla Inc. (NASDAQ: TSLA) that could deliver up to 11% returns in the next 3-6 months.

Tesla, Inc. designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems. The company operates in two segments, Automotive, and Energy Generation and Storage. The Automotive segment offers electric vehicles, as well as sells automotive regulatory credits; while the Energy Generation and Storage segment engage in the design, manufacture, installation, sale, and leasing of solar energy generation and energy storage products, and relatDeasdfed services.

Analyst Ratings

According to TipRanks, 25 analysts are offering 12-month price targets for TSLA in the last 3 months. 12 of those analysts rate it a buy, 7 has a hold rating and 6 has a sell rating. The average price target offered by these analysts is $701.64, with a high of $1,200, which is a 74.17% upside from current levels.

Why TSLA is trending?

TSLA stock prices declined recently fueled by the news about the National Highway Traffic Safety Administration (NHTSA) is investigating Tesla’s Advanced Driver Assistance System (ADAS) to assess its self-driving technology after reports that detailed its vehicle’s involvement in a series of crashes. It may be noted that the NHTSA probe could have consequences for other companies developing advanced driver-assist or autonomous-vehicle systems.

However, Tesla also has some tailwinds. The stock seems to be trading near key support levels as it pulls back. The company has also been demonstrating incredible growth and an impressive operating margin. Management is anticipating vehicle deliveries to grow more than 50% this year. Furthermore, the company’s second-quarter operating margin was 11%, and the management is expecting to achieve an industry-leading operating margin over time.

Another positive is the infrastructure bill in the Senate, which includes money for cities and states to invest in EV-charging infrastructure.

Despite the stock’s sell-offs by insiders as well as retail investors, institutions have been buying the dip in Q3. Canada Pension Plan Investment Board increased its position 617% quarter-over-quarter for a total of 330,196 shares, while Australia-based Hyperion Asset Management increased its Tesla stock position by over 20%. Cathie Wood’s ARKK has a ~10% allocation to Tesla stock.

Tesla is also hosting its artificial intelligence day on Thursday, August 19, 2021, wherein the electric vehicle pioneer is expected to put its self-driving technologies on display. Musk is expected to give keynote remarks, while engineers are expected to demo hardware and software. Participants will also be able to test ride Tesla’s Model S Plaid.

With multiple factors in play, here’s how to trade TSLA now.

TSLA Chart

On analysis, the overall trend of TSLA seems to be still up. There are also multiple bullish indications on the daily chart of TSLA.

#1 Pennant Pattern Breakout: As seen from the daily chart, the stock was in an uptrend after which it started consolidating and was in a narrowing range. This is a classic pennant pattern and is marked in the chart in pink color. A pennant is a continuation pattern. Whenever a stock breaks out of the pennant pattern, it typically continues its previous trend (uptrend in this case). Currently, the stock has broken out of the pennant pattern. This is a possible sign of an upcoming bullish move.

#2 Price Above MAs: The stock is currently above its 50-day as well as 200-day SMA, indicating that the bulls are still in control.

#3 Bullish RSI: The RSI is currently above 50 and moving higher. This is a possible bullish sign.

#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.

#5 Bullish Stoch: The %K line (blue color) is above the %D (orange color) of the stochastic in the daily chart. This is a possible bullish sign.

Recommended Bullish Trade (based on the chart)

Buy Levels: If you want to get in on this trade, the buy level for TSLA is in two scenarios. These are marked as green color dotted lines in the daily chart.

• Buy Level #1: You can purchase half the intended quantity of shares of TSLA above the price of $690.00.
• Buy Level #2: You can purchase the remaining shares of TSLA above the near-term resistance level of $720.00.

Important Note: Make sure that you only enter the trade once the daily close is above the recommended price level.

TP: Our target prices for various buy levels are as follows

• The target prices for Buy Level #1 ($690.00) are $720 and $750 in the next 3 to 6 months.
• The target prices for Buy Level #2 ($720.00) are $750 and $800 in the next 3 to 6 months.

SL: To limit risk, place a stop loss at the following levels.

• The stop loss for Buy Level #1 ($690.00) is $673.00
• The stop loss for Buy Level #2 ($720.00) is $701.00.

Note that the stop loss is on a closing basis.

Target Upside: Our target potential upside is 4% to 11% in the next 3-6 months.

• Entry at Buy Level #1 ($690.00): For a risk of $17.00, our first target reward is $30.00 and the second target reward is $60.00. This is a nearly 1:2 and 1:4 risk-reward trade.
• Entry at Buy Level #2 ($720.00): For a risk of $19.00, our first target reward is $30.00 and the second target reward is $80.00. This is a nearly 1:2 and 1:4 risk-reward trade.

In other words, this trade offers 2x to 4x more potential upside than downside.

Risks to Consider: The stock may reverse its overall trend if it breaks down from the breakout level of the pennant pattern with high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.

Recommended Bearish Trade (based on the chart)

In case the stock breaks down from the pennant pattern and closes below the near-term support level, it would point to an upcoming short-term correction. In that case, below are the entry level, stop loss level, and target prices.

Sell Level: You can take short positions on TSLA below the price of around $640.00. This sell level is marked as a red color dotted line in the chart.

Important Note: Make sure that you only enter the trade once the daily close is below the recommended price level.

TP: Our target prices are $600 and $580 in the next 3-6 months.

SL: To limit risk, place a stop loss at $660.00. Note that this stop loss is on a closing basis.

Our target potential downside is 6% to 9% in the next 3-6 months.

For a risk of $20.00, our first target reward is $40.00 and the second target reward is $60.00. This is a nearly 1:2 and 1:3 risk-reward trade

In other words, this trade offers nearly 2x to 3x rewards compared to the risks.

Risks to Consider: The stock may reverse its overall trend if it breaks upwards with high volume. The breakout of the stock could be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.

Happy Trading!

Trades of the Day Research Team

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