If you put a gun to my head (this is a hypothetical folks!) and told me to pick one stock for the month of April, it’s a no brainer that I pick Tesla.
TSLA has been on fire this year and now is breaking out to all-time highs.
Now some traders are hesitant to trade stocks that are “over-valued” and making new highs. While it is true that many of these stocks fail, it’s important to take note of the character of the breakout and history of the stock. Let’s take a look at the weekly chart for TSLA.
Notice that the previous two breakouts after long consolidations lead to monster momentum breakouts and continuation moves. Back in 2013 Tesla had consolidated for over a year before making it’s first big 120 point momentum move. Again in 2013 it made a 70 point momentum run after consolidating for much of late 2013. This is what I mean by understanding the character of the breakout and history of the stock. Tesla has shown that when it consolidates and breaks to new highs, it is likely to make a big move.
The current new high breakouts comes off a two year-long consolidation. Even better, the stock has already made two attempts at breaking out. Thus, the stock is set to soar now that the weak hands have been shaken out of the failed breakout attempts. Therefore, a big momentum run to $350 or even $400 at some point this year is not out of the question.
As you can see, Tesla is a fantastic momentum stock for swing traders. However, you must trade it with caution. One quick glance at the weekly chart easily let’s us know this stock is extremely volatile, even when it’s running. To counter the volatility, be patient with entries, don’t chase, and use wider than normal stops.
Watch today’s video as I show you exactly how I am looking to trade TSLA over the coming months. I analyze the trend and lay out potential pullback and breakout trades.
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