Howdy Lou: Hope you're well and enjoying our waning summer. I bought a Tesla Model S and was so impressed with the car and the organization that I bought shares – first at $50, then at $100 and then again at $118. The stock's on fire and I was curious to hear your thoughts from a technical perspective. Thanks, Chris
Thanks for your good wishes and the same to you and yours! I am enjoying the last weeks of the summer of 2013 and looking forward to the summer of 2014. Congratulations on the purchase of your Tesla Model S. Please keep me informed on how it performs for you so I can keep up with your user experience. Your investments in Tesla Motors Inc. has been a real sweet ride to the penthouse of profits. Your first buy at $50 was well advised given that the stock had broken above resistance at $40 and there was a golden cross that formed in December, 2012.
In January, Micha, one of my students at Sheridan College asked me about Tesla. The young man's eyes were wide with enthusiasm as he talked about company founder Elon Musk and what the man was accomplishing. I advised him to buy the stock. From a gut level perspective, any time you are that excited about a disruptive technology you should act on it. I'm not saying bet the farm but take a manageable position.
Elon Musk has captured the imaginations of car enthusiasts and investors, and there is talk circulating that he is the next Steve Jobs or Henry Ford. Certainly Musk is hard to ignore given that he's a self-made billionaire,the Model S has received high ratings from Consumer Reports, and he has scheduled a release for Aug. 12, 2013, where he will introduce his hyper-loop rapid transit concept. The hook is that the hyper-loop will be able to move people from San Francisco to Los Angeles in 30 minutes. As we say in my house: that's fascinating, tell me more!
An examination of the charts will provide a technical view of Tesla.
The three-year chart indicates the shares had not been able to break and stay above $30 going back to late 2010. But keep in mind that it had its initial public offering in June, 2010, at $17. The move through resistance at $30 in November, 2012, followed by the golden cross in December signalled the game was afoot. The MACD indicated there was more to come in March when shares broke above resistance at $40. From there it has all been gravy.
The six-month chart indicates there is an established uptrend line, which has been tested, but not breached, and the momentum indicators are not generating sell signals. At this point you are in profit and need to decide on how best to proceed with your well-earned gains. Ted Carter taught me many years ago to get your adjusted cost basis down to zero and let your profits run. That allows you to diversify your holding and and spread out your risk. The hyper-loop announcement on Aug. 12 could add more sizzle to this steak. The next flex point on the calendar will be the release of third-quarter results in November.
Make it a profitable day and happy capitalism!