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

Tesla Inc. (TSLA) shares appear to have broken out and could continue to rise from current levels. In an August 29 Investopedia article, we noted that Tesla shares could be getting ready to surge higher. (See: Why Tesla Could Be Getting Ready To Surge Higher.)

On September 11, the stock rose roughly 6 percent, signaling a potential technical breakout. Meanwhile, the options market signaled expectations of elevated levels of volatility to come, paving the way for a possible rise toward $400.

If Tesla stock rises to $400, that would be an increase of nearly 10 percent from current levels. At that price, the electric carmaker would have added nearly $6 billion to its market cap, taking it a total of $66 billion.

Potential Breakout

In the prior article, we noted that Tesla had a formed a chart pattern called a symmetrical triangle, as illustrated by the combination of the red and green lines in the chart above. The chart reveals that the stock price has now broken above the red trend line, signaling a breakout. The breakout is significant because since peaking in mid-June, the stock has been consolidating, continually making a series of higher lows and lower highs. It seems possible at this point that Tesla should be able to regain its prior highs around $390 and push toward the psychologically important $400 level.

The 15-minute chart shows how the stock has risen right back toward the $363 level, which finds its roots back to mid-June as well. This likely is a significant technical support level for the stock in the future should there be a pullback.

Option Market Expecting Highs Levels Of Volatility

(Interactive Brokers)

Interestingly, the options market is pricing in a lot of volatility ahead for Tesla stock, with an implied volatility of nearly 40 percent for options set to expire on January 19, 2018. By comparison, similar S&P 500 options have an implied volatility of only 6.3 percent.

The $360 put-call spread is also pricing in massive volatility for the stock, pricing in an 18 percent move at the $360 strike price. The range is from $330 to $396, about a 9 percent move in either direction from the current stock price of around $364. Amazingly, the $400 calls are trading at a price around $19.70, meaning the stock would have to trade to $419.70 to just break even by the expiration date.

Bullish Combination

The options market is telling us that traders are expecting a big move in Tesla shares by the middle of January 2018, while the chart is looking increasingly bullish. Pulling all of this together gives the sense that investors are gearing up for the stock price to rise over the next couple of months.

Of course, we know the market can be very fickle and change at a moment's notice. But for now, with the absence of any major news or surprises, the chart and the options market suggest higher prices are on the horizon.

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 holdings. Information 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.

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.