Tesla Share Price – Is $2,000 Too Much To Ask?

Summary:

Tesla share price poised to rise on a possible S&P500 inclusion. So far the price action resembles a pennant formation with a measured move above $2,000.

A few weeks after the company released its Q2 2020 earnings, Tesla share price consolidates in a tight range. Tesla posted its fourth consecutive profitable quarter and becoming eligible for the S&P500 inclusion.

However, the excitement over Tesla share price seems to have been evaporated. The price action in the weeks that followed slowed down significantly, with investors looking for action in other stocks.

But there is no significant decline either. If anything, Tesla share price consolidates in what seems like a pennant formation.

Is $2,000 a share too much to ask for Tesla? The answer is no, and it has room to advance even more.

Tesla and the S&P500 Index

The big prize for the company’s share price is the S&P500 inclusion. More precisely, the possible S&P500 inclusion.

Such a news should boost Tesla share price further. Portfolio managers that run stock index funds must buy over twenty million shares of Tesla, more or less worth $40 billion.

However, to do so, portfolio managers need to rebalance their portfolio. More exactly, to sell other names to get cash to buy Tesla. The trick here is to see if the potential selling would trigger a move lower in the overall market.

What investors do not know is that fund managers can do the buying/selling in time. It is not mandatory for the buying/selling to take place after such an announcement.

Tesla Share Price Technical Analysis

We do not know yet if the index inclusion will happen anytime soon. However, if it does, the news only is enough to propel the share price higher.

From a technical perspective, the market seems to form a pennant formation. The measured move points to a level well above $2,000. Moreover, a break higher is not necessarily to come after such an announcement. A close look at the daily traded volume reveals that during regular two or three trading days, more shares exchange hands than the ones needed for funds managers to rebalance their portfolios.