Why Tesla Could be Back at $ 830 in a Month

Why Tesla Could be Back at $ 830 in a Month

The fundamental environment continues to improve for Tesla shares (NASDAQ: TSLA ). On Friday, the Palo Alto, California-based electric vehicle maker announced another record for vehicle deliveries in the first quarter of 2021.

That alone would be good news for stocks. The icing on the cake? The biggest driver in the market right now is President Joseph Biden's multi-part COVID-19 relief package, designed to help provide a stronger recovery for America's newly revived economy. And one of the central programs on the Democratic agenda is tackling climate change, which includes tightening emissions regulations. Thus, a key element in the administration's green initiative is pushing drivers toward electric cars, an obvious victory for Tesla.

In that sense, Wedbush technology analyst Daniel Ives yesterday updated its rating for TSLA to "above average" and assigned a target price of $ 1,000 to the shares for the next 12 months. That would be a 31% increase from yesterday's closing price at $ 691. It also provided a long-term vision of $ 1,300, an increase of 88%.

We expect the stock to hit $ 830 in just one month. Three weeks ago, we argued that "Tesla shares may have bottomed out." We believe yesterday's operations confirmed that.

On Monday, the stock completed the bottom of a head and shoulders chart, as it crossed the neckline of the pattern, the trend line (purple) connecting the lows of the pattern. Next, it's worth seeing if we can identify technical pressure points and understand how this reversal fits on the chart.

The head and shoulders chart moved precisely both within the ascending channel that emerged after bottoming out in March and in the descending channel from the all-time highs on January 25.

The price was unable to sustain a steeper ascending secondary channel from the October lows, temporarily helping the price break out of the original channel. The price then peaked with its own head and shoulders chart.

Let's look at how both head and shoulder structures share the same neckline, which conforms to the technical principle of a support level becoming a resistance level. These two head and shoulders chart patterns are a true reflection of each other, and if yesterday's rally persists, we believe the price will once again hit the all-time highs recorded in January at $ 883.09.

However, while price rose above its immediate neckline, and while that trend line provided support when price braked gains on Monday, price encountered resistance at the original trend line of the head chart. and shoulders (dotted line) since January 11. Also, the volume stayed flat.

We would like an increase in volume to boost the odds of a consensus for the rally. We can see the same hesitancy expressed in the momentum through the RSI. After bottoming out, and confirming a new base, the RSI encountered resistance at the previous support level, issued through the top of the head and shoulders chart.

Created on 20th Apr 2021