Tesla: What Really Matters To Investors

Feb.18.14 | About: Tesla Motors (TSLA)

I was walking down the street of a very affluent rural community East of Del Mar, California, and I was approached by a woman who seemed like a local. She could see that I just took a stroller and car seat (and child) out of my car, and she said, "What you need is the new Tesla SUV." I was initially taken back, who was this woman and how did she know what I needed, but after a few minutes I discovered that she owned three Tesla (NASDAQ:TSLA) Model S Sedans, and she was on the waiting list for the SUV.

Apparently, the waiting list is nine months for that yet to be released SUV, but she was already a fan. "You can just walk your stroller into the car, or your bike," she said. Of course the child-safety laws were not part of her discussion, but I could clearly see that she was passionate, and liked the idea of clean-energy vehicles. She also fit another typical Tesla demographic, she was wealthy.

I won't go so far as to call Tesla a niche play anymore though, because I think many more people are attracted to Tesla now that they have made the leap from energy efficiency to Luxury, and the combination works. It reminds me of Apple (AAPL) when it combined the internet with cell phones; there was a clear need for it, and Tesla is just satisfying the Market's demand.

Also, like Apple, it helps that Tesla was first to market with a luxury electric vehicle. Usually it is the company that is first that is rewarded the most, but they also assume the most risk. Tesla was not without its risks at the beginning, but the company appears to have built a cult-like following as well. My experience recently taught me that there are Tesla believers that are as adamant as iPhone buyers, and although cult-like followings in non-financial circles are concerning, when you have a following as strong as that your products often fly off of the shelves. That may be happening with the New Tesla SUV, even before its actual release.

What matters to investors?

Clearly there are positives, and we have seen headlines detail the negatives too, but what really matters to an investor is none of that. Investors are concerned about making money, and when it comes to Tesla's Stock the only thing that is going to make you money is price.

Therefore, with all of the recent and upcoming news events considered, a price-based analysis of TSLA is much more revealing to investors looking to make money. According to our real time trading report for TSLA, the stock is in the process of increasing from longer term support towards longer term resistance lines again. In addition, the stock is already well above support, and it is much closer to resistance, which should be a concern to new buyers of the stock.

By rule, we like to buy stocks near support, and sell or short them near resistance, and in the case of TSLA, after the recent surge from $140 to $200, the stock is much closer to resistance than support. Our real time Trading Report suggests that TSLA has a little more to run before tests of resistance become official, but the stock is not a buy here by rule (we never buy in the middle of a channel). Instead, people interested in making money from TSLA should consider securing those gains by rule.

This analysis by Stock Traders Daily does not suggest that TSLA's business model will falter, it does not suggest that the demand for the SUV will suddenly change, and it does not suggest that the recent fires will damage the cult-following, our analysis is based on one thing, the most important thing to people interested in making money, and that is price.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: By Thomas H. Kee Jr. for Stock Traders Daily and neither receives compensation from the publicly traded companies listed herein for writing this article.