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Tesla (TSLA) shares look ready to break out to new highs as the company ramps up its artificial intelligence capabilities. The electric vehicle pioneer is up 10% this week after bullish comments from Morgan Stanley, forming a potential cup base that could offer a new entry point for investors.
According to IBD’s MarketSmith chart analysis, Tesla stock is shaping a cup pattern with a buy point around $299. Currently trading at $272, the stock is 9% shy of that pivot level. More aggressive traders may look to enter on a move above last Monday’s peak of $278, just above the stock’s current price.
This emerging base comes on the heels of a 15-week consolidation for TSLA between February and June. If the stock drifts lower in light volume in the coming weeks, it could set up an ideal handle to provide a lower-risk entry.
“If a handle starts to form and [Tesla] starts to drift lower in light volume, it could give us an opportunity to add to the position if it were to move above yesterday’s high,” said Investor’s Business Daily’s Ken Shreve on Tuesday, referring to the stock’s September 12th intraday peak.
Per standard risk management rules, investors should set a 7–8% stop loss below their buy point in case the trade goes awry. Having a predefined exit plan is key to limiting potential losses on any position.
What’s behind the recent optimism around Tesla stock? Morgan Stanley upgraded shares to overweight with a $400 price target, seeing untapped value in Tesla’s software and services business. The analysts drew comparisons to Amazon Web Services, which became a crucial profit driver for Amazon even as its retail operations matured.
“This is a name that’s been on Leaderboard in the past,” noted Shreve, citing Tesla’s sturdy fundamentals despite stiffer electric vehicle competition lately. Rivals like Mercedes-Benz, Volkswagen, Lucid and Nio have all accelerated EV development, but “I still think this stock has the potential to do well because of outstanding revenue growth,” Shreve added.
Tesla and Chinese EV makers could face headwinds as the EU opened an anti-subsidy investigation into electric vehicles imported from China. While Tesla may benefit from probes into potentially unfair competition, its own Gigafactory Shanghai could fall under scrutiny.
Meanwhile, Tesla is poised for expansion with over $3 billion in planned parts purchases from India, according to recent announcements. A $15 billion investment is also slated for Tesla’s Mexican Gigafactory unveiled this week.
Tesla remains a leader in growth and technology among automakers, ranked №2 in its industry group with a near-perfect Composite Rating of 96. It places 42nd on IBD’s list of top growth stocks.
Yet even with positive catalysts, prudent risk control is essential when trading a volatile name like TSLA, our experts emphasize. “You can have your thesis, you can buy stocks with momentum and strength,” said IBD’s Ali Coram. “But at the end of the day, if it’s not moving in your favor, you have to be willing to cut and run.”
With Tesla continuing to push the boundaries of EVs, autonomy, and electrification worldwide, the company’s future prospects appear bright. Investors will be closely monitoring the technical setup for TSLA shares in the coming weeks for a potential new entry point.
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