Back in mid-September, EV-automaker Tesla (TSLA) was bombarded with negative news. Reports swirled that the company was under investigation by the Securities Exchange Commission (SEC) and the Department of Justice. Questions about CEO Elon Musk's temperament arose after a series of controversial tweets. Despite a roaring bull market that drove the S&P 500 to a fresh all-time high, Tesla slumped below $300.
Despite the negativity, it was time to buy the controversial stock. The technical indicators for Tesla were improving. This could've been easily overlooked if one ignored the charts and focused on the news.
Less than three months later, the situation is reversed. The once-powerful bull market is now staggering: On Monday, the S&P 500 reached its lowest point since early April.
Instead of being dragged lower with the market, Tesla is clawing its way higher. Under less than ideal circumstances, Tesla has gained 37% over the past three months, making it one of the top performers in the Nasdaq 100 over that stretch.
The question is, where does the stock go from here?
With short interest at 22% of its float, Tesla is still a popular target among short sellers. That's actually good news for bulls, because every short will eventually have to buy Tesla in order to close the trade. All that is required is a catalyst to convince the shorts to run for cover.
That catalyst may be approaching. Over the past two years, Tesla has failed repeated attempts to break above $390 (arrows). A rally of just 7% from Monday's close is all that is needed to push Tesla to an all-time high. That would certainly give shorts a good reason to cover their trades.
Tesla's MACD (moving average convergence divergence) indicator just flashed a buy signal (shaded yellow), indicating that the stock's recent ascent may be about to resume.
Not long ago, Tesla was infamous for burning through cash, but the company is now free-cash flow positive. As a result, analysts are finally getting on board with this stock. Earlier in December, Jeffries upgraded Tesla to a buy rating with a $450 target, citing an improving balance sheet as the company prepares to pay off a bond obligation due in March.
Perhaps the best indicator in the change in how Tesla is perceived is the way the stock held up in the wake of Musk's Sunday night interview on the 60 Minutes news program. Musk berated the SEC on national TV, the type of negative event that would've sent the stock swooning just three months ago.
On Monday, traders shrugged off the interview and pushed the stock higher by 2%. What a difference three months can make.