Tesla stock is taking its time to reveal its full potential, this market maven says.
Shares of the automaker have taken investors on a roller-coaster ride recently, with the stock soaring in December following elections, and the subsequent elevation of CEO Elon Musk into government. Shares reached an all-time high of 488.54 in December last year.
But since then, Tesla slid to a low of 214.25 in April on a combination of controversy surrounding Musk's foray into politics, a stagnant product line and rising competition in electric vehicles worldwide. The stock now continues a 47-day consolidation period.
Tesla Stock's Sideways Action
"It's going clearly sideways," David Keller, president of Sierra Alpha Research, told Investor's Business Daily. He says this is a consolidation phase, or a narrowing of the range. A stock that undergoes this transformation could eventually break out to the upside.
"These are the types of charts that (John Bollinger) would always share with me, which are names that are consolidating," Keller said. "These are great charts because you wait for that move, the breakout after that low volatility phase."
Keller says the real promise from Tesla stock comes from its potential future. "I don't know based on this chart yet which way we're going to break, but I have a clear signal to what would tell me this is a positive breakout," he said.
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Hammering In American Express Stock
Keller sees a similar bullish pattern in American Express, with shares finding support at a major moving average. The price pattern is visible through short-term lower highs and lows. "I would get excited when that pattern breaks, which means we break above the trend line," he said.
Keller says the chart has a bottoming pattern called a "hammer candle," in which the open and close are near highs of the day. The stock exhibited a hammer candle on Aug. 1, closing at 294.27, with a high that day of 294.91 and a low of 288.34.
A hammer candle indicates a potential positive reversal in the stock, where selling pressure is decreasing and buying pressure is rising.
"Think about what that means," Keller said. "Someone somewhere was buying in enough to push the price back up to close near the highs of the day." He says analysts would consider it a short-term accumulation sign.
Course Correcting In Trades
But while names like Tesla stock and American Express will inevitably take time to develop into actionable patterns, Keller says technical analysis is not intended to predict the future.
Instead, its purpose is to help guide and course-correct the investor. "If you think about it like a pilot, if you've ever tried to land an airplane, a windsock is still at most airports and shows you the direction of the wind," Keller said.
"Pay attention to the wind sock, pay attention to the expected market direction or the expected direction of the wind, but always be making these little subtle corrections with the yoke, and then with your portfolio as well."
Follow Mike Juang on X at @mikejuangnews and on Threads at @namedvillage.
