REUTERS/Steve Nesius
- Tesla surged as much as 8% on Tuesday as the stock reclaimed a key technical price level.
- Shares of Tesla soared above its 50-day moving average for the first time since mid-February.
- Improving momentum indicators, coupled with fresh record highs in the Nasdaq 100, suggest more gains ahead for Tesla.
- Watch Tesla trade live here.
Tesla traders are likely breathing a sigh of relief on Tuesday after the stock surged as much as 8% and reclaimed a key technical price level that has represented overhead resistance since mid-February.
Shares of Tesla opened up just above its 50-day moving average in Tuesday's trading session, and decisively moved higher throughout the afternoon as buying pressure overpowered sellers.
Moving averages are a lagging trend-following indicator that technical analysts use to smooth out price movements and help identify the direction of the current trend in place.
Traders view the the 50-day moving average, which is the average daily closing price of a stock over its previous 50 trading sessions, as a short-term moving average that often represents areas of support or resistance for a stock. If the stock is trading below the moving average, the average serves as a likely area of resistance.
But now that shares of Tesla are back above its 50-day moving average, it will serve as a likely area of support for the stock.
Tuesday's rally in shares of Tesla coincides with near record highs in the Nasdaq 100, and improving momentum indicators suggests that the rally may continue. Tesla's relative strength indicator is on the rise and has plenty of headroom before it enters what traders consider to be overbought levels at 70.
If Tesla stock continues to hold the 50-day moving average as support, then traders will look to its January record high of $900 as the next price objective for the stock, representing potential upside of 18% from current levels.
The EV manufacturer was the best performing stock in the S&P 500, and Tuesday's rally also helped spark a 4% jump higher in Cathie Wood's flagship ARKK fund, which counts Tesla as its largest position.
