I watch how shares of Tesla (TSLA) behave because the company interests me more than any other. I’m a long-term Tesla bull, but as a trader I’m opportunistic in my approach. My last article on Tesla (10/6), published when shares were trading around $240, predicted a deeper correction in the stock, which came to pass.  

There is a very active Tesla bear contingent, who take great pride in bashing the stock and the company. After the Model X launch they gloated when Adam Jonas cut his delivery expectations and were elated when recently Consumer Reports pulled their recommendation on Tesla after a survey of 1400 users indicated assorted reliability issues (those damn door handles!).

CEO Musk tweeted the next day that these issues have already been addressed, but the stock nevertheless fell to one of my key target levels: $207.75. This is the Volume Profile Point of Control; the exact price level at which the stock has transacted the most business over the last 400 trading days. In other words, it is a “line in the sand.” It is also a Fibonacci retracement level.

Frankly, I have been expecting this level to fail, but it was only briefly violated after the Consumer Reports downgrade, and the stock responded very well to a report yesterday on a surge in Model S sales in China (they were up about 70% from Q2 to Q3.)

Additionally, the notion is circulating that the Model X could be a huge hit in China due to its exceptional air filtration system. (4400 people in China die every day from pollution-related illness.) Using the biohazard setting, the air in a Model X can be filtered to meet the standards of a hospital operating room.

The bullish action in the shares… the stock’s ability to respond to good news after a steep decline… sends a message to traders such as myself: get long.

To your investing success…

Kenneth Reid, Ph.D.

FD: I have no position in the stock or in TSLA options at this time. That may change at any time.