Tesla, Inc. (TSLA) shares rose more than 3% on Monday after Elon Musk warned short sellers that they had about three weeks until their positions "explode." With the company set to update on second quarter production and deliveries in early July, many traders are speculating that these figures will be better than the market is expecting and lead to a short squeeze.
The stock has rallied significantly higher since the beginning of the month, when Elon Musk first suggested that the company was "quite likely" to meet its Model 3 production goals of 5,000 vehicles per week by the end of June. In the middle of the month, he also purchased 72,000 shares of stock in what was seen as a vote of confidence, bringing his total holdings to about 33.74 million shares.
Of course, there are still many concerns for stockholders. Elon Musk is known for setting ambitious targets that are difficult to meet, and over the weekend, actress Mary McCormack reported that her husband's Tesla Model S randomly caught fire in Los Angeles traffic. (See also: Musk: 'Radical Improvements' Needed to Hit Targets.)
From a technical standpoint, the stock broke out to its highest levels this year. The relative strength index (RSI) appears quite oversold with a reading of 78.26, but the moving average convergence divergence (MACD) suggests that the uptrend remains strong. These indicators suggest that there could be some near-term consolidation, but the long-term trend remains bullish.
Traders should watch for some consolidation above the $360.00 level over the coming days before a resumed move higher. The next major price targets are the all-time highs reached last year of around $384.00. If the stock breaks down from these levels, traders could see a move down to retest R2 support at around $330.00 or lower trendline resistance at around $290.00, although these scenarios appear less likely. (For more, see: Tesla to Roll Out Software With Self-Driving Focus.)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.