Elon Musk becomes the world’s richest person: How far can TSLA soar?

Any time a trading instrument is in the midst of a parabolic move, risk management is critical.

New Highs 3

We’ve repeatedly checked in on Tesla Motors (TSLA) in recent weeks (including already on Monday by my colleague Fiona Cincotta), but frankly, the price action in the stock demands it.

At this point, even superlatives aren’t enough. TSLA shares are trading higher for the eighth straight day and nearly hit $900 this morning after eclipsing $800 for the first time yesterday (…and $700 for the first time on Monday). They’ve doubled in less than two months. The company recently eclipsed Facebook (FB) to become the fifth largest company on the planet by market capitalization. Just yesterday, Tesla founder Elon Musk eclipsed Jeff Bezos as the world’s richest person, with a net worth approaching $200,000,000,000.

Technical view

With euphoria over the shares reaching a fever pitch, the stock is certainly vulnerable to a quick reversal if momentum falters. After all, even a stock-specific -20% “bear market” would only take prices back to around $700, where they ended last week.

That said, in the infamous words of John Maynard Keynes, “the market can remain irrational longer than you can remain solvent.” Countless bears have been wrecked by shorting the stock over the last half decade, and there’s no reason it can’t continue to rise from here in the short term.

Any time a trading instrument is in the midst of a parabolic move, risk management is critical. In the case of TSLA, bullish traders could use a short-term moving average, like the 8-day EMA, as a possible stop loss area. If the stock breaks below that price, it could signal that a deeper pullback is in play. Likewise, rather than blindly shorting at these stratospheric levels, TSLA bears could wait for a breakdown below the 8-day EMA (or, more conservatively, a bearish crossover of the 8-day EMA back below the 21-day EMA) to consider short entries with a tight stop loss.

Source: GAIN Capital

To use an analogy, when you see a runaway freight train, don’t stand in front of it hoping it will turnaround; either hop aboard or wait or wait for to start slowing down before reversing!

Learn more about equity trading opportunities.

More from Tech Stocks


This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.