Tesla (TSLA) Surges Over 10% in 2020 Following S&P 500 Index Addition Announcement
Tesla's stock price soared after the announcement of its inclusion in the S&P 500 index scheduled for December 2020, signaling a potential surge driven by index fund purchases.
Shares of Tesla, Inc. (TSLA) experienced a significant rally, climbing more than 10% during trading on Tuesday after the S&P Dow Jones Index Committee confirmed that Tesla would be added to the prestigious S&P 500 index this December.
Highlights to Note
- Tesla's stock jumped over 10% following the news of its S&P 500 inclusion set for December 2020.
- Market analysts have reinforced their Buy recommendations, anticipating nearly $10 billion in stock acquisitions by index funds.
- Technical indicators, including the relative strength index (RSI), suggest that Tesla’s share price has the potential for further gains in the near term.
Garrett Nelson, an analyst at CFRA, reiterated a Strong Buy rating with a price target of $550 per share. He forecasts earnings per share (EPS) of $2.30 for 2020 and $3.50 for 2021. According to Barron's, the inclusion could trigger approximately $10 billion in stock purchases by S&P 500 index funds, providing a short-term boost to Tesla’s stock price this December.
From a technical perspective, Tesla’s stock broke out of a symmetrical triangle pattern and tested previous reaction highs during Tuesday's trading session. The RSI stands at a neutral 60.53, while the moving average convergence divergence (MACD) indicator hints at a possible bullish crossover. These signals imply that Tesla’s shares could continue to climb before entering overbought territory.
Trading Insight
Symmetrical triangles typically represent continuation patterns in markets lacking a clear directional trend. The current breakout suggests renewed momentum.
Traders should monitor the breakout above the trendline resistance at $463.13, which could pave the way toward prior all-time highs near $500. Conversely, if the stock retraces, support levels near $420.95, corresponding to the trendline and 50-day moving average, may come into play, though this seems less probable given the bullish momentum.
Conclusion
Tesla’s inclusion in the S&P 500 index has catalyzed a sharp price increase, breaking out from a key technical pattern. The stock appears poised for further upside as it challenges resistance levels in the coming sessions.
Note: The author does not hold any positions in Tesla stock except through passively managed index funds.
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