When a stock breaks out to new all-time highs, it can be difficult for technical traders to predict how much follow-through a breakout will have. Tesla Inc (NADAQ: TSLA) breached its 2014 all-time highs and eclipsed $300/share this week, breaking above a $290 resistance level that had held the stock down for nearly three years.
However, without a definitive longer-term trading pattern in place, predicting just how high Tesla stock could go before it runs into resistance can be difficult.
One method technical traders often use to determine a new target price after a breakout is to look at the size of the stock’s previous trading range. For Tesla, the stock has spent the overwhelming majority of the last three years trading in a wide range between $180 and $290. Based on the size of that range, Tesla may ultimately be headed to $400, suggesting Tesla could have another 30 percent upside ahead.
Of course, traders should also be watching for signs that Tesla’s recent move could be a false breakout, such as the stock’s brief dip to $141 in early 2016. If the Tesla breakout is true, the $280-290 level should serve…
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