(Note: The author of this fundamental analysis is a financial writer and portfolio manager. He and his clients own shares of TSLA.)

Last week, we talked about shares of Tesla Inc. (TSLA) being driven by technical analysis, with the stock price looking to refill a technical gap created after the electric car company's second-quarter results. The shares continue to trade in a similar manner. With the lack of news flow, it is unlikely that will change anytime soon. With the technicals continuing to dominate trading in shares of Tesla, it could be that the stock price is set to rise in the near future. (See: Tesla Shares Fall As Technicals Dominate.)

Technical Analysis Domination

Trading today is dominated by technicals, so much so that the technicals can no longer be ignored because it is not folklore or like reading tea leaves. Understanding the technicals in trading today is just as important as knowing the fundamentals like a PE ratio. Algorithms and high-frequency trading can be programmed to detect these technicals driving the direction of trading more than anything else. 


TSLA Chart

TSLA data by YCharts

Tesla's Outperformance

Tesla shares have rallied by nearly 91 percent since December 2, 2016, versus an S&P 500 that has gained only 11.5 percent. But Tesla's chart is looking awfully bullish, with the stock for the most part filling a gap created post-earnings. It is now apparently in the middle of a symmetrical triangle. 

A Breakout Coming?




In the chart above, we have three lines: a blue line which represents an area of support around $300; the green sloping uptrend line; and the red sloping down trend. The gap is circled in red, and at this point has been nearly filled, taking place early last week.

The important thing to note in the chart is the green sloping trend line that has been in place now since the middle of March. This uptrend line is acting as support for Tesla stock currently. A significant break below the green line would likely send shares lower back toward $300. The red downward sloping trend line is acting as resistance on the stock, with Tesla shares retreating upon reaching that level. 

The red and green lines together form a symmetrical triangle, which is a continuation pattern of the previous trend, and in this case, is an upward bullish one. The pattern would indicate that Tesa shares could be looking to break out and trend higher, back toward the highs around $380, and potentially even higher. 

With technical analysis dominating the trading in Tesla, reading the chart seems just as important as knowing any other fundamental metric.

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.

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