Tesla, Inc. (TSLA) shares rose more than 10% during Tuesday's session after the S&P Dow Jones Index Committee announced that the electric vehicle manufacturer will be added to the S&P 500 index in December.

Key Takeaways

  • Tesla shares rose more than 10% during Tuesday's session after news that it would be added to the S&P 500 index in December.
  • Several analysts reiterated their Buy ratings following news of the index inclusion, which could prompt nearly $10 billion in stock purchases by index funds.
  • Traders should watch key trendline support and resistance levels, as the relative strength index (RSI) suggests that the stock could have more room to run over the coming sessions.

CFRA analyst Garrett Nelson reiterated a Strong Buy with a price target of $550 per share following the news. Nelson expects earnings of $2.30 per share this year and $3.50 per share next year. Barron's estimates that nearly $10 billion worth of Tesla stock will need to be purchased by S&P 500 index funds, which could create a short-term boost for the stock in December.

Chart showing the share price performance of Tesla, Inc. (TSLA)
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From a technical standpoint, the stock broke out from a symmetrical triangle pattern to retest reaction highs during Tuesday's session. The RSI remains in neutral territory with a reading of 60.53, but the moving average convergence divergence (MACD) could see a bullish crossover. These indicators suggest that the stock could have more room to run over the coming sessions before reaching overbought levels.

Tip

Symmetrical triangles are thought of asĀ continuation patterns developedĀ in markets that are, for the most part, aimless in direction. The market seems listless in its direction.

Traders should watch for a breakout from trendline resistance at $463.13 to make a move toward prior all-time highs of around $500.00 over the coming sessions. If the stock breaks down, traders could see a move toward its trendline support and 50-day moving average near $420.95, although that seems less likely to occur given the bullish momentum.

The Bottom Line

Tesla shares moved sharply higher during Tuesday's session after news that it would be included in the S&P 500 index in December. With its breakout from a symmetrical triangle, the stock could see further upside over the coming session as it tests trendline resistance.

The author holds no position in the stock(s) mentioned except through passively managed index funds.