Tesla Inc (TSLA) Stock Is Gaining Momentum. Time To Buy Now?

Tesla Inc (NASDAQ:TSLA) stock popped nearly 6% in yesterday's trade. Is this the beginning of another bull run after being almost flat for few months?

esla Inc (TSLA) Stock Is Gaining Momentum

Shares of the Elon Musk led Tesla Inc (NASDAQ:TSLA) have lost some momentum in the past few months after zooming past in the first half of 2017 to nearly 70% gains. The momentum in TSLA stock in H1 2017 appeared to be so strong that $400 mark was within striking distance. However, over the last few months, Palo Alto California based electric car maker's stock hit a few speed bumps. There have been a few upward swings in the last three months but none of them could sustain. Tesla stock popped nearly 6% in Monday's trading session, one of the stock's largest movement either ways in the recent stock history. So, will this upward swing set the stock on another bull run? Time to buy TSLA stock now? Let's take a closer look.

What drove Tesla shares higher yesterday?

There was no exact reason behind TSLA stock's big uptick yesterday.  There was an influx of positive news which could be attributed as the reason behind Tesla stock gaining momentum. The clean energy company yesterday announced that they opened two new Supercharger stations-one each in Chicago and Boston. The expansion of the company's supercharging network is very critical to the company's long-term growth. Tesla hopes to double the number of Superchargers by the end of 2017.

Further, the statement of the family of Joshua Brown, a Tesla Model S driver killed in May 2016 while using the car's semi-autonomous driving system, was released yesterday by a law firm. The family in their statement did not blame the car for the crash. This could be considered as a big positive for the company and the stock. The National Transportation Safety Board is set to vote on the likely cause of the crash today. All these latest developments gave a big boost to investor sentiment and driving more investors to buy Tesla stock.
TSLA stock Price chart comparison to S&P500 over the last three months

China could be Tesla's next big growth driver.

The latest reports state that China's Ministry of Industry and Information Technology is working on plans to phase out the sale of fuel-powered vehicles and promote electric vehicle technology. According to the state media, Deputy industry minister Xin Guobin speaking at a forum said that his ministry is conducting "research on formulating a timetable to stop production and sales of traditional energy vehicles." This development could have global repercussions with China being the largest automobile market in the world.

Earlier in June, there were reports that Tesla was in talks with the Shanghai government to explore local manufacturing in the city's Lingang development zone. The latest stance of the Chinese government could expedite the process. If this deal goes through, then the 25% import tariff on its models will be eliminated, which has given an edge to its local rivals. China is a market which the company needs to capitalize on and cannot ignore for long to up the ante. Further, Tesla is leading brand for high-end new New Energy Vehicles, NEV, as they are called in China.

China dominates world wide electric car sales.

Warren Buffett-backed BYD has sold the most number of NEVs in the first seven months of 2017. Tesla's first plant in Asia could help it in giving tough competition to other players on volumes also. This could also help the company in a big way to boost its revenues by bringing down manufacturing, labor and shipping costs. China is an important market for Tesla as it is reported that 15% of Tesla's $7 billion revenue in 2016 came from this market. With a big opportunity in the world's largest automobile market and the Chinese government's new proposed initiatives, China could be a big growth driver for the company going ahead.

Tesla stock is gaining momentum.

Tesla stock has been facing resistance at its short-term 20-day Simple Moving Average (SMA) over the past weeks. The stock's latest uptick has helped it break above it on strong volumes suggesting it is building momentum. Further, TSLA stock has found strong support at the 100-day SMA. Providing further strength to the recently gained momentum, Moving Average Convergence Divergence (MACD) has also made a bullish crossover. However, a word of caution for the Tesla bulls. Tesla's Relative Strength Index (RSI) measure has shot to 66.66, which means that upside from here could take the stock into overbought territory. Hence, investors need to keep a close eye on Tesla's RSI readings. An eye on Bollinger Bands indicator is also recommended with the current share price very close the upper Bollinger Band. Investors are advised to follow the charts closely before buying into the stock. Unless any negative development comes forth, Tesla stock could build upon this momentum.

TSLA stock daily Technical chart showing 20-day SMA, MACD and RSI indicators.

Looking for fundamentally better auto stocks than Tesla? Check out Amigobulls' top picks from the auto sector, which have beaten the S&P 500 by over 246%. Interested in tech stocks? Then, we also have our top stock picks from the tech sector, which have beaten the NASDAQ by nearly 149%. If you're a trader though, you should check out our daily trading ideas section for daily, free updates on the latest crossovers and other popular technical signals.

Sreekanth Anasa Sreekanth Anasa   on Amigobulls :

Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice.

Buying and selling of securities carries the risk of monetary losses.Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions.

Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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