Tesla (TSLA) recently caught an impressive bid, largely on the back of Donald Trump’s election win and proposed policies that favour business.

Overbought Conditions

While the TSLA stock is up 37% this month, it is overbought according to the Relative Strength Index (RSI), with indicator resistance also calling for attention just north of current levels at 88.66. Adding to this, per the Bollinger Bands (a widely followed volatility indicator), price recently tested the upper Band at US$378.56 (which, in this case, is set to three standard deviations), indicating a mean reversion play could be seen back to the central Bollinger Band: the 20-day Simple Moving Average at US$260.54.

On the other hand, the chart’s Ichimoku Indicator underscores a bullish depiction. The Leading Span A (light green at US$292.07) is above the Leading Span B (light orange at US$282.83), consequently forming an Ichimoku Cloud, and the Conversion Line (blue at US$298.76) is above the Base Line (red at US$285.38).

Price Direction?

Although the stock is well bid, investors may be preparing for a correction given that both the RSI and Bollinger Bands suggest a downside move could be on the table.

Not only could a correction pave the way for short-term selling opportunities, it may also trigger dip buying at key supports. Downside support targets to be aware of include the area between the Ichimoku’s Conversion and Base Lines between $298.76 and US$285.38, in addition to horizontal support coming in from 269.97.

DISCLAIMER

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.