Tesla, the dynamic manufacturer of futuristic cars, cutting-edge energy storage, and slick solar panels, was a sweet ride for traders who bought the massive breakout back in April of 2013.
Preceded by three years of bullish basing action, that breakaway gap led to a cool 350% gain in the six months that followed.
Since then, the overall dominant trend of Tesla ($TSLA) has been sideways.
However, the long-term charts are now hinting that $TSLA may soon break out with another monster rally to new highs.
Continue reading for our “no nonsense” chart analysis that shows you why…
$TSLA – Not Your Typical Breakout
After scoring that 350% gain back in 2013, $TSLA eventually rallied another 50% before forming a top in September of 2014.
The total advance of Tesla’s rally was close to 600% over 17 months, which was an incredible move considering the $300 stock started that run with just a $40 share price.
Although we have seen even bigger moves of 1,000% in the past, such stocks are typically not as liquid as $TSLA.
Also, stocks that rally 1,000% or more usually begin as tiny stocks with a share price below $10.
This is what makes the previous $TSLA rally all the more impressive.
Lengthy Consolidations Lead To Powerful Rallies
After such a strong advance like the 2013 rally, it’s to be expected that $TSLA would need some time to digest its gains.
In this case, we would normally look for at least a one-year base of consolidation to develop.
On the long-term quarterly chart below, notice that $TSLA has been consolidating between the $200 to $300 range for the past nine quarters (more than two years).
Also, the current consolidation pattern is similar to the initial basing action when $TSLA went IPO.
Notice how the base that preceded the massive 2013 breakout was similar in length to the current base of consolidation:
Since each bar on the chart above represents three months of price action, the quarterly chart does an excellent job of showing us the “big picture” of Tesla’s overall trend.
But let’s also take a look at the weekly chart, which gives us a more zoomed in perspective of recent price action:
Annotation #3 on the chart above shows $TSLA has enjoyed a three-month rally of over 50% since forming a bottom at the $180 area (November 2016).
We have seen similar moves in 2015 (#1) and 2016 (#2), but both rallies failed to produce bullish consolidations and breakout.
As such, prices gradually slid back down to the lows of the range both times.
Could This Time Be Different?
We do not have a crystal ball, but we do know what a bullish consolidation pattern looks like.
Ideally, $TSLA will form a cup and handle pattern from here.
To do so, Tesla should pull back no more than 20% to 30% off the recent swing high, then form a constructive base over the next two months.
If the stock can do that (or something similar), then $TSLA may have solid opportunity to break out to new all-time highs this year.
If the breakout does come, remember to look for a substantial increase in volume to confirm the move.
Specifically, a breakout to new highs should be accompanied by a 50% to 100% jump in volume over multiple weeks (not just a single week).
Considering the huge bullish consolidation over the past two years, such a move would be a clear buy signal that screams at us, “The beast is back!”
If you’re a subscriber of The Wagner Daily newsletter, keep an eye on our daily watchlist for our potential buy entry into $TSLA.
Do you think Tesla is setting up for another massive breakout? Drop us a comment below to share your thoughts with the world!
