Tesla (NASDAQ:TSLA) is on our radar for potential breakout buy entry in the coming days. Here’s why…
Tesla ($TSLA), which substantially beat Q1 quarterly earnings expectations last week, has been forming the handle portion of a bullish cup with handle chart pattern for the past three weeks.
As such, we are now stalking $TSLA for potential buy entry in the Wagner Daily model portfolio if the stock breaks out to the upside from this reliable chart pattern.
Check out the $TSLA cup with handle setup on the daily chart below:
Tesla Daily Chart
Deeper Than Normal Cup
Upon closer analysis of this pattern, we noticed the depth of the left side of the “cup” is about 60% deep (range from the Feb. 2020 high down to the March 2020 low).
A cup with a depth of 50% or more is usually not ideal because the stock must rally at least 100% just to get back to the prior high (which becomes a significant area of resistance).
However, the cup depth of 60% is only two times greater than the NASDAQ’s plunge of 30% during the same period. Within the context of the recent, pandemic-driven market sell-off, it’s not bad.
$TSLA Buy Entry Setup
The “handle” has been forming for nearly four weeks, Tesla may soon be ready to breakout to new highs-on the heels of its impressive earnings report.
We’re watching $TSLA for two possible buy entry points:
- Buy $TSLA on a rally above the $800 level (above the May 5 high).
- Buy $TSLA on a potential pullback to near-term support of its 10-day moving average ($754 area). A pullback entry would allow for a bit more wiggle room if the price hits resistance at the $900 to $1,000 area and then stalls.
If Tesla triggers our buy entry, we will be setting a protective stop below the 20-day moving average and support of prior low from May 1.
Tesla: Breakout From Cup With Handle
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