Should you buy Tesla stock after rallying over 137% YTD?

Tesla (NASDAQ:TSLA) is the largest electric vehicle manufacturer in the world. It is one of the biggest brands on earth, helped by its charismatic CEO, Elon Musk.

Tesla’s stock price collapsed in 2022. After trading as high as $400/share at the start of that year, it ended up at the $100/share area when it found support.

Interestingly, the selling accelerated when Elon Musk completed the Twitter deal in October 2022. Because he was forced to sell Tesla shares to fund the Twitter deal, the stock price collapsed. Sure enough, high interest rates and the bearish sentiment for US stocks did not help either.

But then something happened.

Last Friday marked the 12th straight day of Tesla’s stock price advancing. The squeeze higher should have been painful for short sellers, considering that Tesla’s stock price delivered over 137% gain YTD.

So should you buy the stock here?

What triggered Tesla’s stock rally?

The US stock market bounced in late 2022. Overall, it remained resilient despite the fact that the Fed hiked the rates in one of the steepest tightening cycles ever.

Moreover, markets have priced in two rate cuts later this year. Despite the Fed’s rhetoric arguing the opposite, investors bought stocks on every dip.

This week, the Fed did pause the hiking cycle. The question is now – if the Fed stopped hiking with inflation at 4%, would it do it with lower inflation?

So that was one thing that supported the overall US equity market.

Most recently, Tesla’s investors received great news as the Model 3 qualifies for a $7500 EV consumer tax credit. Also, the company announced a deal that General Motors (NYSE:GM) customers would be able to use Tesla’s supercharger network in North America. This translates in roughly an additional $3 billion in income for Tesla.

How about Tesla’s technical analysis picture?

The recent rally confirms a bullish flag pattern – a continuation pattern that formed in the last three months. It suggests more upside lies ahead, although its measured move was already reached.

Tesla chart by TradingView

The bearish trend and bias should persist while the price remains below the main bearish line. However, as the market approaches dynamic and horizontal resistance, it seems just a matter of time until it breaks them.

That is especially true if the bullish market sentiment continues. Considering that the summer trading months lie ahead, one should not be surprised to see Tesla’s stock keep rising.

And with it, Musk’s fortune.


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