Tesla, the electric-car maker, is a high-risk/high-reward stock. How can investors tilt odds in their favor? By understanding the bull-and-bear fundamental scenarios and using new concepts in technical analysis.
Reading the chart
Let us start out by taking a look at the chart.
Please click here for an annotated chart of Tesla.
There are two key points to observe.
First, there is a trendline slanting at about 30 degrees going all the way back to when the stock was about $45. As of this writing the stock is at $247.30. During this meteoric rise and punctuated by high volatility, the trendline has not been decisively broken. This is very positive and portends well for the future.
Second, take a close look at the volume. Notice that the 50-day exponential moving average (EMA) of volume was above the 240-day EMA as the stock rose from $40 to $260. However, over the last few months, the 50-day EMA of volume has fallen below the 240-day EMA. In our extensive testing and over 30 years of experience in the markets, when volume dries up after a meteoric rise in price, it does not bode well for the future.
The top two observations from the chart are at conflict with each other.
The bull and bear scenarios
Under our bullish scenario, in 2019, Tesla TSLA, can earn $18 per share and trade at a P/E of 28. This puts the stock at $504…Read more at MarketWatch
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