Tesla Setting Up Well
Automaker Tesla is setting up quite well for a sustained move higher on its' weekly chart. After monster gains in 2020 (see prior trades here and here), Tesla has been basing over the past few months. This can be considered normal action considering Tesla's substantial move over the past year. I really like the way it has been consolidating on low volume over the past seven weeks, indicating a lack of distribution.
This morning, Tesla gapped up on news it is set to join the S&P 500. I never like to buy a huge gap up like this, as rallies often fade as the day goes on. I took a position in Tesla around 3pm today as it moved closer towards its' 50-day moving average. If TSLA can take out some more overhead resistance and overall conditions are favorable, I may add to my position.
It is somewhat concerning to me that today's close was lower than the open. However, with a stop loss in place, I believe the risk to reward makes this an appropriate play. If Tesla falls towards its 200-day moving average, I'll take a small loss. If it begins a strong multi-month uptrend, I'll profit handsomely. That's really all we can do as traders. We'll never be able to predict the future, but we will always be able to look for situations where there are opportunities to make multiples of what we risk.
Full Disclosure: Tesla is a stock I currently own.
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