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. Insurance

    Top 6 Car Insurance Companies in New York

    Read about the top private auto insurers licensed to operate in New York, and learn about recent trends in market share among these companies.
  2. Markets

    The 5 Biggest Chinese Natural Gas Companies

    Read about the top five Chinese natural gas companies as measured by gas production volume and learn a little more about their business operations.
  3. Markets

    The 5 Biggest Chinese Insurance Companies

    Read about the top Chinese insurance companies by market capitalization, and learn a little about their positions in the marketplace.
  4. Insurance

    Top 8 Car Insurance Companies in New Jersey

    Read about the top personal auto insurers operating in New Jersey, and learn about recent trends in market share among these companies.
  5. Stock Analysis

    How Much Coca-Cola Spends on Advertising

    Learn about Coca-Cola's ad spending and why the company has decided to spend the amount of money it does. Understand comparable companies and industries.
  6. Investing

    Welcome Back, Volatility

    Volatility is likely to resurface as the Federal Reserve gets closer to adjusting its monetary policy stance, even if that adjustment is a measured affair.
  7. Economics

    What Is The Labor Market Conundrum?

    We are facing a conundrum with investment implications: Why are wages still stagnant, when jobs are being created at the fastest pace since the late 90's?
  8. Investing

    Why Are Consumers In Hesitation?

    Diverging monetary policy globally and a stronger dollar continued to be key drivers of the recent underperformance and last week’s tumble in U.S. stocks.
  9. Economics

    Bulk Shipping Companies Struggle As Markets Soften

    The "soft" dry bulk shipping market that confronts shipping companies is a result of lower demand from China, and an excessive amount of bulk ships.
  10. Stock Analysis

    Sierra Wireless Benefits From These Megatrends

    We take a closer look at how Sierra Wireless' transition from 2G to 3G and 4G technologies, has impacted its business today, and the future expectations.
RELATED TERMS
  1. Fractal Markets Hypothesis (FMH)

    An alternative investment theory to Efficient Market Hypothesis ...
  2. Core Durable Goods Orders

    New orders for U.S. core durable goods, which are the total durable ...
  3. Investopedia

    One of the best-known sources of financial information on the ...
  4. Market Depth

    The market's ability to sustain relatively large market orders ...
  5. Closing Tick

    The difference between the number of stocks that closed higher ...
  6. Institutional Brokers' Estimate ...

    A system that gathers and compiles the different estimates made ...
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 >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!