With many momentum stocks coming back into favor this week, it will be interesting to see if the moves can continue to see upside.

One issue that may have found resistance and may be preparing to reverse course is Tesla (NASDAQ: TSLA). Since beginning the week at $206.42, it sprinted to $235.54 on Tuesday, but has not been able to reclaim that level. It did make one more attempt at the area on Thursday, but was rebuffed at $235.31 and ended up closing just off its lows for the day at $227.79.

Off Friday's open, Tesla attempted to revisit that level once again, but sellers in the lower $230 range capped the rally at $231.29. Interestingly, that was in the vicinity of Wednesday's high ($231.71). Therefore, the market has identified two groups of sellers ($231.00 and $235.00) levels, that are attempting to exit their longs or attempt shorts into strength.

The big move on Monday appeared to be a delayed reaction to the news on Friday that the company would be opening its patents to the public. Musk explained the company was created to accelerate the the transition towards sustainable transportation and to lay “intellectual property landmines” in their wake would be in contradiction of that goal.

Furthermore, the team at Tesla actually believes that allowing patents to open-sourced will actually strengthen the company. Musk noted that patents serve a little more than a road bump to a determined competitor and that the true advantage comes from attracting and motivating the world's best engineers.

Related Link: Twitter Finally Warms Up To Wall Street

In addition to this news, Financial Times reported on Sunday that Tesla had struck a deal with Nissan and BMW to create a supercharger network for its vehicles. This news hit the wires while the US markets were closed and was slow to circulate Monday morning as the issue opened only slightly higher before it exploded to the upside.

More good news came out later on Monday that the company had struck a deal with New York regarding its retail locations in the state. Andrew Cuomo signed legislation that will allow the company to maintain its five retail locations currently in New York. That news instigated follow through in Tuesday's session that took Tesla to its highs for the week. After ending the session on Tuesday at $231.67, its highest close since March 20 ($234.91), Tesla posted back to back closes in the $227.00 handle and traded significant volume at this area in Friday's session.

With the wires quiet the remainder of the week, Tesla traded in a narrow range from $226.12-$235.31. During Friday's session, Tesla tested the lower end of the range and was not able to breach the $230.00 range, let alone other resistance levels.

From a technical perspective, if one discounts the spike in late February to its all time high of $265.00, the entire $230-$240.00 area served as major resistance for several trading sessions. This adds further significance to the $235.00 area, which is smack dab in the middle of this former resistance range. Finally, Tesla cratered from the top of this range in late March to its May 9 low ($177.22).

With its next earnings release not due out for another few months and the issue trading above many of Wall Street's price targets,it is not likely the Street will push the issue higher. Therefore, the absence of another news catalyst may be enough to instigate some profit taking from its recent rally.

Investors wanting to lock-in profits from the rally or ones trying to wiggle out of a wayward buy from the spike high, may want to focus on the major support at $226.00. A breach of that level may determine whether or not the issue will revisit its all time high or retreat to the psychologically important $200.00 technical level.

tsla_chart.png

tsla_graph.png

Related Articles
  1. Budgeting

    Just the Right Book Review: Is It Worth It?

    Take an in-depth look at Just the Right Book, a subscription service that delivers personalized book selections based on your reading history and preferences.
  2. Economics

    Can the Market Predict a Recession?

    Is a bear market an indication that a recession is on the horizon?
  3. Budgeting

    The Honest Company Bundles Review: Are They Worth It?

    Learn more about The Honest Company and its bundle subscription services, which deliver discounted diapers, formula and other baby products to your doorstep.
  4. Products and Investments

    The One Thing Your Portfolio Must Always Have

    Portfolio diversification is essential in any situation, but especially so as the market finally returns to fundamentals.
  5. Budgeting

    Blue Apron Review: Is It Worth It?

    Read about one of the top meal-kit delivery services in the United States, and learn more about what it offers and how much it costs.
  6. Budgeting

    Plated Review, Is It Worth It?

    Take a closer look at the ready-to-cook meal service, Plated, and learn how the company can help you take the hassle out of home cooking.
  7. Investing News

    How China's Economy is Now Like America's

    China's economy could take the global economy down with it; why that might be good news in the grand scheme.
  8. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
  9. Fundamental Analysis

    South Korea - King of Exports

    Read about one the most important and successful exporting countries in the world, and learn more about the types of products it exports.
  10. Investing News

    Volatility Vexed? See What the Experts Are Saying

    Volatile times lead to a diversity of opinions on where the market is headed. Here are takes from five investing luminaries.
RELATED FAQS
  1. What is the long-term outlook of the metals and mining sector?

    An industry agency council was established by the World Economic Forum in 2014 to serve as an advisory board on the future ... Read Full Answer >>
  2. What is the railroads sector?

    The railroads sector is comprised of publicly traded stocks for companies that operate railroad tracks and/or trains. Railroad ... Read Full Answer >>
  3. Who are Amgen Inc.'s (AMGN) main competitors?

    Biotech giant Amgen Inc (AMGN) bills itself as one of the first biotechnology firms. It was founded in 1980 and has grown ... Read Full Answer >>
  4. What's the most expensive stock of all time?

    Back in late August 2012, Apple’s (AAPL) stock price reached nearly $700 per share. The stock has since split but has yet ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center