Tesla Buy Signal Flashes Ahead of Musk-SEC Showdown

Tesla stock is trading near a key long-term trendline

Tesla Inc (NASDAQ:TSLA) is enjoying solid gains today, up 2.8% to trade at $293.94. CEO Elon Musk, fresh off the April 1 release of his rap song about slain gorilla Harambe, will have his court date tomorrow, April 4, with the Securities and Exchanges Commission (SEC). Musk faces contempt of court charges on allegations he violated an agreement from last fall that required approval approval before tweeting or making statements about Tesla's business.

Since running up to the $380 level in December, Tesla stock has been carving out a channel of lower highs and lows, shedding 23% from its Dec. 7 peak at $379.49. There could be a light at the end of the tunnel, though, as the equity recently pulled back to its 40-month moving average.

According to Schaeffer's Senior Quantitative Analyst Rocky White, the seven other times TSLA tested support at this trendline, it averaged a three-month gain of 18.1%. A move of similar magnitude would put the equity near $347 by mid-summer, based on its current perch.

In the options pits, put buying has been more popular than usual in recent weeks. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the security with a 10-day put/call volume ratio of 1.06, which ranks in the elevated 72nd percentile of its annual range.

Echoing that, the stock's Schaeffer's put/call open interest ratio (SOIR) of 2.53 sits in the 89th percentile of its annual range, underscoring a rare put-skew among near-term traders.

There's skepticism seen elsewhere on Wall Street, with short interest up 17.2% in the two most recent reporting periods. The 29.87 million TSLA shares currently sold short represents 23% of the equity's available float, or 3.5 times the average daily pace of trading.