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Tesla: Breakout From Cup With Handle

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

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:

  1. Buy $TSLA on a rally above the $800 level (above the May 5 high).
  2. 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.

Original Post

Tesla: Breakout From Cup With Handle

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