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Nasdaq 100: How high can Tesla’s share price go?

Is Tesla’s 137% year-to-date share price rally sustainable?

Tesla car image Source: Bloomberg

Tesla shares finally halt after impressive run

Tesla Inc stock enjoyed an impressive run over the past month, rising more than 40% and adding $200 billion in value.

Tesla has scored a notable success with the adoption of its charging system by industry titans Ford and General Motors. Reuters reports that this will put 60% of the US electric vehicle market on the same charging system used by Tesla.

This may be the route to long-term success for Tesla. Having pioneered the electric vehicle market, it risks seeing its market share in car sales being eroded as the older, bigger firms catch up. But if it can license its technology to other firms the potential benefits are huge.

While it continues to trade at an eye-watering PE of 62, compared to 8.2 and 5.6 for Ford and General Motors respectively, this deal is perhaps an example of the way ahead for Tesla.

How to trade the Tesla share price?

Refintiv analyst recommendations Source: Refinitiv

Refinitiv data shows a consensus analyst rating of just about ‘buy’ for Tesla – 7 strong buy, 14 buy, 16 hold, 2 sell and 3 strong sell - with the median of estimates suggesting a long-term price target of $200.00 for the share, roughly 22% below where the share is trading (as of 15 June 2023).

IG client sentiment Source: IG

IG sentiment data shows that 65% of clients with open positions on the share (as of 15 June 2023) expect the price to rise over the near term, while 35% of clients expect the price to fall whereas trading activity over this week and month 51% of sells.

Technical analysis on the Tesla share price

The Tesla year-to-date 137% rally is looking increasingly parabolic as it approaches its August-to-September 2022 key $313 to $315 resistance area, a sign that the bubble may soon burst.

After all the Relative Strength Index is at similarly overbought levels - above the 91% mark on the daily chart - as it was back in November 2021 before the Tesla share price topped out at its $414.50 all-time high.

Tesla Weekly Chart

Tesla Weekly Chart Source: Tradingview
Tesla Weekly Chart Source: Tradingview

Having said that, the “trend is your friend” and this is still clearly pointing up. While the May-to-June uptrend line at $242.35 holds and last week’s price gap at $242.02 to $235.23 isn’t filled, immediate bullish pressure remains in play.

Tesla Daily Chart

Tesla Daily Chart Source: Tradingview
Tesla Daily Chart Source: Tradingview

Ahead of the key resistance August-to-September 2022 highs, sit the early September 2022 low at $265.74 and the early August low and late September high at $279.35 to $289.00, either of which may act as resistance.

Were these levels to be blasted through and the current ascent take the Tesla share price above its $314.67 August 2022 peak, the way would be open for the April 2022 peak at $384.29 to be reached.

If, however, a reversal or at least a correction lower were to be seen over the coming weeks and the two-month uptrend line be slid through, the February-to-March highs at $217.65 to $207.79 should offer good support.

At the time of writing, despite an extremely overbought RSI, there is currently no technical indication of a significant bearish reversal taking shape.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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