What’s Driving the Rally and How to Trade the MomentumTesla's share price surged more than 27% higher last week following a series of positive developments that reignited investor confidence. Let’s take a look at what’s driving Tesla higher, and how to trade this burst of bullish momentum.
What’s driving Tesla higher?
Better-than-Expected Deliveries Report:
• Tesla's second-quarter vehicle deliveries exceeded Wall Street estimates. Despite a 4.8% decline in deliveries compared to the previous year, the drop was less severe than in the first quarter, sparking investor optimism.
Anticipation of Financial Results:
• Investors are eagerly awaiting Tesla's second-quarter financial results, set to be released on July 23. Key focus areas include automotive gross margins, especially in light of the extensive discounts and incentives Tesla has been offering.
Upcoming Events and Innovations:
• Tesla's Robotaxi Day, scheduled for August 8, is expected to be a significant event for the company. Sector analysts believe this could act as a catalyst for the stock, even though the Robotaxi segment is not expected to launch before 2027.
Despite the recent rally, Tesla's stock is up only 1.2% for the year, lagging behind the broader market gains of the Nasdaq (up 22%) and the S&P 500 (up 17%).
How to Trade Tesla’s Burst of Bullish Momentum
Last week’s rally saw the shares break decisively above the April swing highs and surpass the descending trendline (gold dotted line) that has been in place for the past year. This burst of bullish momentum was backed by an increase in volume, but the exponential nature of the rally has taken the shares well above the upper Keltner Channel, making a sustained continuation of the rally less likely without some form of mean reversion.
Hence, traders looking to buy into Tesla’s resurgence might consider waiting for an orderly pullback. The timing of pullbacks is highly subjective, but key areas to watch would be the 20-day exponential moving average (EMA), which is the basis line of the Keltner Channel, and the top of the broken trendline (gold dotted line), as this may provide support moving forward.
Tesla (TSLA) Daily Candle Chart
Past performance is not a reliable indicator of future results
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