A Tesla Trading Strategy
Tesla has a potentially bullish short-term catalyst in FSD 12, and a long-term catalyst in India's automotive market.
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When it comes to Tesla TSLA and Elon Musk, there's never a dull moment. Tesla jumped 4.3% on Monday, as two separate items fired investors' imaginations.
How important are these developments, and how will they affect the stock?
On social media platform X, a user asked Musk, "Any guess on when customers might first be able to try out FSD 12?" Musk simply replied, "About 2 weeks."
FSD 12 stands for Full Self-Driving, version 12. FSD 12 is expected to be the first non-beta version of Tesla's automated driving software, so it's an important step in the company's evolution.
Musk's unpredictability has some folks wondering if he's serious, but there's a chance he's sincere about the impending release of FSD 12. Deliveries of Tesla's Cybertruck are scheduled to begin on November 30, in just over two weeks.
Meanwhile, the Financial Times is reporting that Prime Minister Modi of India is considering Elon Musk's request to lower tariffs on imported electric vehicles. Musk is reportedly scouting locations in India for a new Tesla plant, as Modi previously asked Musk to consider manufacturing vehicles in India.
India currently charges a tariff equal to 100% of the vehicle's price for cars worth more than $40,000, and a 70% tariff for vehicles valued at less than $40,000. According to the Financial Times, the new rate for EVs would be 15%, and would apply to all manufacturers, not just Tesla.
In the long-term, this is a massive opportunity for Tesla. According to Bloomberg, India is the fourth largest automotive market, with 150 million registered vehicles in 2022. India's market for EVs is relatively small, but that could change once Tesla gains a foothold -- especially if tariffs for imported EVs are slashed.
In summary, Tesla has a potential short-term catalyst in FSD 12, and a long-term catalyst in India's automotive market.
How Should We Trade the Stock?
Technically, Tesla is consolidating within a symmetrical triangle, which features two opposing trendlines (black dotted lines). There is a trading opportunity within this pattern.
Traders can enter an initial position at current levels (point A), and add to that position if the price breaks above Tesla's descending trendline (point B). That line comes in at around $260.
On the other hand, if the price breaks below the lower trendline, currently near $200, traders can exit with a small loss. Close the trade if the price drops below $194, the stock's October 31 low (point C).
View Chart »View in New Window »
Chart Source: TradeStation
Bottom Line
Tesla has a potentially bullish short-term catalyst in FSD 12, and a long-term catalyst in India's automotive market. I'm taking an initial long position, and will add to it on a breakout. If the stock falls to $194 or less, I'll exit the trade.
At the time of publication, Ponsi was long TSLA.
