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Trading Tesla as Company Taps Equity Raise

Investors continue to wonder: Just how far can Tesla rally?

It wasn’t long ago that Tesla logged a $500 billion market cap. Now this week it’s seeing its valuation swell beyond $600 billion.

This name drove short-sellers crazy when it was contending with the size of General Motors  or Ford and Fiat Chrysler combined. Now it’s worth about five times all three of them.

Even on Tuesday, shares were hardly flinching despite the company’s decision to raise more funds. After opening lower on the day, shares are now higher by 1.1%.

After recently raising money a few months ago, Tesla decided to turn to the capital markets for another $5 billion.

A few years ago, $5 billion was a lot of money for Tesla. Now it’s less than 1% of its market cap. But it was smart to raise capital when it could vs. finding itself in a situation where it needed to raise capital.

Trading Tesla

Daily chart of Tesla stock.

Daily chart of Tesla stock.

Chart courtesy of Stockcharts.com

In November, I highlighted the very clear breakout in Tesla. The stock rallied up toward $460 resistance, closing higher by more than 8% on the day. In the next session, shares tacked on another 10%, bursting through that ceiling.

Shares quickly went on to make new highs north of $500, with $600 becoming short-term resistance.

It led to a quick dip down to the 10-day moving average, followed by another burst through resistance as Tesla rallied 7.1% on Monday to new highs.

The strength here has been stunning — there’s simply no way to describe it. However, the higher it goes, the harder it becomes to stay long for many traders.

The fact that shares aren’t down despite increasing supply shows that bulls remain in firm control. From here, I want to continue to see the 10-day moving average act as support. Further, it would be bullish to see Tesla stock maintain above $600.

Ultimately, this stock’s run will end one day. When that happens, it would be quite bullish to see the $460 to $500 area — the former highs and former resistance — to act as support.

On the upside, I want to see if Tesla can continue its run to the two-times range extension near $675, as measured from the September low to the preceding all-time high. Above that and the 261.8% extension comes into play north of $780.