Trading Tesla Stock After Impressive Earnings Beat

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Shares of Tesla  (TSLA) – Get Tesla Inc Report were electrified this morning, ripping higher and climbing 11.7% at Thursday highs.

Acting as the catalyst was the company’s better-than-expected earnings report. Tesla topped both earnings and revenue expectations. 

It continues to deliver upbeat margin results and impressive metrics even in the face of its many doubters. 

At last check though, shares are up just 5.5% as the stock hit a key level on the chart. What it does from here is important. 

Not only will have an impact on the electric vehicle stocks and growth stocks — remember, it’s the top holding in the Ark Innovation Fund  (ARKK) – Get ARK Innovation ETF Report — but also on the broader market in general.

While Netflix  (NFLX) – Get Netflix, Inc. Report seemed to make the market volatile after its one-day 35% earnings plunge, keep in mind its market cap is now below $100 billion. Tesla on the other hand has a $1 trillion market cap.

If the market loses Tesla, it stands to lose momentum as a whole. Given the action we’re seeing in other non-defensive sectors, perhaps it’s only a matter of time.

That risk exists even though — as one RealMoney contributor put it — Tesla knocked the cover off the ball.

Trading Tesla Stock

Daily chart of Tesla stock.

Chart courtesy of TrendSpider.com

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Many tech stocks are rolling over on Thursday. Perhaps it’s part of the next leg down. Maybe it’s because Fed chair Jerome Powell will speak this afternoon. Either way, the market-wide weakness is not helping Tesla stock.

When I was looking at the chart this morning, the $185 level stuck out like a sore thumb.

Why? That’s where the 61.8% retracement of the current range was near, while the gap-fill level was up at $1,187.

However, we can now navigate the stock from here.

Previously the 21-day moving average was acting as resistance, while Tesla stock was sporting a two-day high of roughly $1,035. On the downside, that area is our line in the sand.

If Tesla holds the 21-day moving average and $1,035 area as support, the bulls’ case gains some strength. Even though the stock faded from a somewhat notable level, it was also a natural profit-taking area.

On the upside, the next area is obvious as well: The post-earnings high at $1,092.

Above that level opens the door to downtrend resistance (blue line), followed by last month’s high near $1,150.

On the downside, a break of $1,035 that isn’t reclaimed opens the door back down to $1,000. That’s followed by recent support in the $975 area, then the 50-day moving average and $945 area.

Do your best to remove any biases you have toward Tesla stock — a highly emotional name — and trade level to level.