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Why I Bought More Tesla Stock on Friday


In the Sept. 1 issue of Traders Daily Direction, I told you I was taking a small position in Tesla, Inc. (TSLA) stock.

At the time, TSLA was just starting to break out of an “ascending triangle” consolidation pattern.

I explained that the pullbacks were becoming shallower and shallower…

Volume was decreasing, which meant less supply was coming to market…

And the moving averages had turned upwards…

The short-, medium- and long-term trends were all pointing higher.

And fundamentally, the company was seeing huge growth in both sales and earnings.

All of this created a compelling case for a long trade in TSLA.

But given the stock’s volatility, I decided to test the waters by taking a position that was about half my normal position size.

You can see my first entry into the stock in the chart below.

Daily Chart of Tesla, Inc. (TSLA) with Initial Entry — Source: TradingView

So far, the trade is working well. In fact, I just added to it on Friday.

TSLA jumped roughly $35 a share, then pulled back to the initial breakout area.

It continued to tighten up, and subsequent pullbacks shrank to a nice and compact 5%.

So, I added to my position when it broke $764.00 and made a new multi-month high.

As of Monday afternoon, TSLA was trading at over $795.00, which equates to a gain of roughly 9% from where I started buying earlier this month.

Daily Chart of Tesla, Inc. (TSLA) with First & Second Entry — Source: TradingView

Right now, my stop is at $718.60. This gives my position plenty of wiggle room in case there is another pullback.

But if TSLA continues its surging breakout, I will likely raise my stop to $744.25 to protect my profits.

As you can see, taking a partial position like this is a good way to trade a volatile stock.

It allows you to build up a small profit, which you can use to “finance” the risk.

And it allows you to add on to your initial position only once you are profitable.

I do the same thing with other volatile stocks like GameStop Corp. (GME) and AMC Entertainment Holdings, Inc. (AMC), which I told you about back in the Aug. 19 issue of Traders Daily Direction.

I’ll follow up on my AMC trade and explain how it played out for me in a future issue, so stay tuned!

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