Could Tesla (TSLA) be gearing up for a major bullish run? Veteran analyst Rick Pedicelli breaks down five critical technical factors that suggest a potential swing buy entry for the electric vehicle giant.
Tesla (TSLA), the electric vehicle powerhouse, is showing signs of a potential swing buy entry according to Rick Pedicelli, a veteran analyst with over 20 years of trading experience. In this blog post, we’ll dive deep into the five key technical factors Rick has identified that could signal a major bullish move for TSLA. Plus, we’ll reveal an exclusive NASDAQ signal that could confirm this setup.
Setting the Stage: Recent TSLA Price Action
Let’s start by examining Tesla’s recent price action on the weekly chart. We can see a downtrend line with multiple touches that’s been in place since November 2021. In early July, there was a downtrend line break, but it didn’t last long as the price dipped back below while forming its current basing paradigm, which is nine weeks in length so far.
Signal #1: Breaking the Long-Term Downtrend Line
The first key reason for a potential swing buy entry is the break of the longer-term downtrend line. Although the price action is currently above the downtrend line, we still have Thursday and Friday sessions to go. Until the price can take out the prior high, we won’t have a confirmed downtrend line break in place.
Signal #2: Forming a Powerful 9-Week Base
On the daily chart, we can see Tesla forming a nine-week base that’s 33% deep, which is acceptable. The lows of the base held above the bullish consolidation from earlier in the year. There was a brief dip below the 200-day exponential moving average (EMA) for a few days, but the price quickly recovered, which is a positive sign.
Signal #3: 200-Day EMA Support Holding Strong
The 200-day EMA is acting as strong support for Tesla’s price action. The 50-day EMA has crossed above the 200-day EMA, signaling positive momentum for the longer term. The 200-day EMA is flattening out and will eventually turn up. This constructive basing pattern is what we want to see after a powerful advance, allowing the price to consolidate, build energy, and potentially act as a springboard for a breakout to resume the uptrend.
Signal #4: Higher Lows Pattern on the Daily Chart
Within the base, we can see the price action clearing the downtrend line and forming higher lows. This indicates that the price is trending higher. The only aspect that isn’t ideal is the 20-day EMA still being below the 50-day EMA, but this could change as the price pushes up to the $249-$250 area.
Signal #5: Reclaiming the 50-Day EMA with Volume
Tesla reclaimed the 50-day EMA on Thursday with a pickup in volume, followed by an immediate rejection. However, the price has held above the low of that rejection day for the past few days, suggesting this was more of a shakeout than the start of another wave down. The price also reclaimed the 50-day EMA on Tuesday with a slight pickup in volume, then undercut Tuesday’s low and touched the 20-day EMA on Wednesday before reversing back up and closing above the prior day’s high on increased volume.
For aggressive traders, the reclaim of the 50-day EMA can be a reason to buy or put on some exposure. Alternative entry points could be pullback entries if the price were to retake the $238-$240 area but stall at the gap fill and pull back to a rising 8-day EMA.
Bonus: Crucial NASDAQ Confirmation Signal
In addition to the five technical factors, a crucial NASDAQ signal could confirm the Tesla setup. We want to see the NASDAQ hold above its 8-day EMA on a closing basis in the short term. If the price closes back below the 8-day EMA and takes out the low of the day, it could indicate more selling pressure and potentially cause Tesla to retest its 200-day EMA.
Key Takeaways
- Tesla is showing signs of a potential swing buy entry based on five key technical factors:
- Breaking the long-term downtrend line
- Forming a powerful 9-week base
- 200-day EMA support holding strong
- Higher lows pattern on the daily chart
- Reclaiming the 50-day EMA with volume
- The reclaim of the 50-day EMA is a potential buy signal for aggressive traders, with Wednesday’s low acting as a support level to watch.
- A crucial NASDAQ confirmation signal to monitor is the index holding above its 8-day EMA on a closing basis in the short term.
Remember, these technical insights should be applied within your risk management framework.
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