Tesla Motors Inc (NASDAQ:TSLA) stock has been under heavy selling pressure as of late. After hitting an all time high of $265 in February 2014, the stock has since seen a steady decline, closing at $178.59 on May 7th. You might ask, what has caused such a large decline in the share price? The answer is simple. This latest 10% drop came as a result of earnings and obvious chart analysis. Just like Tesla Motors, Inc. vehicles need a charge in order to operate, it is healthy for a stock to pull back (get a recharge). This "recharging" enables stocks to have healthy sustainable long term move higher by rebuilding momentum. The more extended the run up, the bigger the pull back, as we are seeing in Tesla Motors Inc. and we have seen in other bubble stocks of late.
In the chart below, notice how Tesla Motors Inc moved up, getting extremely extended from the twenty day moving average, represented by the yellow line. Think of the twenty day moving average as the recharging station. Tesla's epic move higher used up all of the energy. Tesla Motors Inc (NASDAQ:TSLA) only went back twice this year to the twenty day moving average, not allowing buyers to build up energy for a healthy long term move up. At $265, Tesla Motors, Inc. was clearly out of range and no where near any kind of significant support, causing the equity to sell off sharply.
As always this kind of move creates opportunities for knowledgeable technical traders. So where is the next Supercharging Station for Tesla Motors Inc (NASDAQ:TSLA)? The chart below is showing us that near term support will be around the $165 level (represented by the 1st grey line). This will bring about a short term bounce (1-2 weeks). However if you want to enjoy a longer ride in Tesla Motors Inc (NASDAQ:TSLA), the Supercharging Station will be at, $140.59 (represented by the 2nd grey line). This is where the stock will find significant support for a longer and safer ride up.
Elite Round Table, Pro Trader