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Shares of Tesla Inc. surged Monday toward a fourth straight gain, which put them on track to surpass a key Fibonacci retracement threshold.
The electric vehicle giant’s stock
TSLA,
rose 4.0% in afternoon trading, and has rallied $209.20, or 23.2%, since closing at a two-month low of $899.94 on Dec. 20.
That Dec. 20 close was $329.97, or 26.8%, below the Nov. 4 record close of $1,229.91.
Also read: Tesla slides into bear market as valuation falls below $1 trillion.
Helping fuel the stock’s selloff was Chief Executive Elon Musk saying he would sell 10% of his Tesla holdings, as a large tax bill loomed, while his claim that he was “almost done” selling has helped power the stock’s recovery.
Don’t miss: Tesla returns to the $1 trillion club as Musk says stock sales are almost done.
Also read: Elon Musk flaunts 2021 tax tab on social media: ‘I will pay over $11 billion in taxes this year.’
A close Monday at current levels could be significant to some technicians, as the stock would retrace 63.4% of the bear-market selloff, which would take it well above the closely watched 61.8% retracement threshold.
That retracement threshold is based on the Fibonacci ratio of 1.618, or 0.618, which is often referred to as the golden, or divine ratio, because of its prevalence in nature, including the human anatomy, sea shells and the breeding pattern of rabbits. Made famous by a 13th-century mathematician known as Leonardo Fibonacci of Pisa, the ratio is based on a sequence of numbers, in which the sum of two sequential integers, starting at zero, equals the next highest integer (0, 1, 1, 2, 3, 5, 8…).
Many chart watchers, who use a variety of technical analysis methods, have adopted the “Fibo” ratio to calculate potential support and resistance, as well as for possible take-profit and stop-loss levels. Besides 61.8%, other key Fibo retracements are 38.2% (0.618 X 0.618) and 50%.
Don’t miss: 5 charts to help unravel the Elliott Wave mystery.
For Tesla’s stock, the 61.8% retracement of the Nov. 4-to-Dec. 20 “bear-market” selloff ((1,229.91-899.94) X 0.618) + 899.94) comes in at $1,103.86. For reference, the 50% retracement was at $1064.93 and the 38.2% retracement was at $1,025.99.
FactSet, MarketWatch
Some Fibo watchers also use the 76.4% retracement (0.618 X 0.382), which for Tesla’s stock would come in at $1,152.04.
So what does surpassing the key Fibo retracement mean for Tesla’s stock? While there is no hard rule, some might say it means the next target is a full retracement of the previous selloff, while others might say the stock has started a new uptrend that is no longer bound by the previous downtrend.
Either way, it means the stock has likely bounced more than many Tesla bears who bet on a selloff may have expected.
Amid all of the recent volatility, Tesla’s stock has run up 57.2% this year, while the S&P 500 index
SPX,
has advanced 27.3%.
