Some analysts suggest the stock is now overbought and testing its moving average.
Tesla’s stock has topped $200 a few times this year, and in recent weeks the company’s shares have shot back up past the mark. The news has left some investors wondering what the milestone means, and whether they should cash in, add to their portfolio or continue holding for the long term.
Above: A Tesla Supercharger (Image: Casey Murphy / EVANNEX).
Barron’s columnist Allen Root points out that it isn’t easy to answer what investors should do with Tesla’s stock as it surpasses $200, representing the first market close above the mark since late March. Root also notes that Tesla’s shares are fairly volatile in comparison with the market overall, adding that it may not be a great idea to buy and sell the company’s shares too frequently.
While retail traders may be more interested in short-term gains and quick profitable trading, other investors will want to hold positions in a company like Tesla for a longer period of time, in theory. Root points to the Tesla stock chart as a way to help traders and investors make decisions, along with some technical analysis to help understand sentiments around certain shares.
Some analysts claim that Tesla’s stock is overbought with recent surges, which often happens when shares increase quickly. The state of a company’s shares is usually measured with the calculation of a company’s relative strength index (RSI), which can range from 0 to 100. When readings increase beyond 70, the stock is often considered Overbought. Currently, Tesla’s RSI is floating around 70.
“The stock now is overbought again and testing its 200-day moving average,” CappThesis founder and market technician Frank Cappelleri said.
Moving averages can also be a good way to show where a stock is trading around, and to give traders and investors an idea of how far shares could possibly fall in the case of a selloff. Alternatively, moving averages can also show how high a company’s shares may surge in the wake of good news.
As one example, Tesla’s shares jumped from roughly $100 to $210 in just five weeks heading into February, though the stock didn’t surpass its 200-day moving average. At the time of writing, Tesla has surpassed its 200-day moving average ($195), and its 50-day moving average ($180). According to Fairlead Strategies founder Katie Stockton, it could also be a good sign for Tesla’s shares if the stock can maintain levels above $180 in a selloff.
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While it’s impossible to tell what may happen to Tesla’s stock in the coming weeks, months and years, investors may take these and other observations as indicators of what their positions should be in the company. Tesla is set to report its Q2 deliveries after this month, and investors will be looking for how profit margins and demand are doing to make their decisions.
At the time of writing, Tesla’s shares are trading at $208.09 (+$4.16), up 2.04 percent from market open on Thursday.