Tesla, Inc. (TSLA) has had its ups and downs since 2016, and when a stock shows patterns of random volatility, the best strategy is to identify trading opportunities while maintaining a core long position. Tesla's annual pivot of $341.84 has been crossed many times this year between Jan. 11 and Aug. 7 as a sign of stability. Since the week of Feb. 12, 2016, there were three buying opportunities at its "reversion to the mean," which is its 200-week simple moving average.
Around mid-day on Tuesday, CEO Elon Musk tweeted that he wants to take Tesla private at $420 per share. Trading in the stock was subsequently halted at $367.25. Many risk-oriented traders are said to be short the stock, which provided forced buyers once the stock traded again. If you have been following my daily and weekly charts and key levels, you would have concluded that going short Tesla was not the prudent bet.
When you look at the weekly chart below, you will observe that weakness held the 200-week simple moving average three times. This "reversion to the mean" held at $157.09 during the week of Feb. 12, 2016, as a clear buying opportunity. The second buying opportunity occurred between the weeks of Nov. 4, 2016, and Dec. 16, 2016, as the "reversion to the mean" rose from $192.13 to $194.71. After trading to an all-time intraday high of $389.61 during the week of Sept. 22, 2017, the stock had a bear market decline of 37% to its 2018 low of $244.48 set during the week of April 6. This low proved to be a buying opportunity at its "reversion to the mean" at $254.34. (See also: What If Tesla Goes Private?)
The daily chart for Tesla
The daily chart for Tesla shows four horizontal lines. The stock was below all four when the company reported a smaller-than-expected quarterly loss on Aug. 1. The stock gapped above its monthly and semiannual pivots of $311.75 and $318.94, respectively, which targeted my annual pivot of $341.84, with potential to my quarterly risky level of $379.30.
The weekly chart for Tesla
The weekly chart for Tesla was negative going into the earnings report but was quickly upgraded to positive, with the stock above its five-week modified moving average of $329.60. The stock remains above its 200-week simple moving average at $260.56, which is the "reversion to the mean." The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 52.75 this week, up from 47.17 on Aug. 3.
Given these charts and analysis, there is only one prudent strategy, and that is to liquidate holdings on strength to my quarterly risky level of $379.30 up to the all-time intraday high of $389.69, which was set on Sept. 18, 2017. Don't wait for a test of $420, as that's just a number. (For more, see: Tesla Model 3 Cracks July Top 10 Car Sales.)