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Tesla's Rally Setup Is Here—But Valuation Makes It Fragile
Written by Sam Quirke. Date Posted: 2/13/2026.
Key Points
- Tesla has bounced off a well-watched support area near $390, improving the near-term technical risk/reward for bulls.
- Several analysts remain constructive with targets above $500, reinforcing the upside case if support holds.
- The prior uptrend break is still a meaningful risk, and a failed rebound could confirm a more durable downtrend.
After weeks of sustained selling pressure that began before Christmas, auto-giant Tesla Inc (NASDAQ: TSLA) finally looks like it has some fight in it again — a relief for many investors.
At one point last week, shares were down more than 20% from December’s all-time high, a sobering pullback for one of the market’s most closely watched momentum names.
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Recently, the stock has begun to rebound, putting buyers back in the conversation. Headwinds remain, and volatility is unlikely to disappear anytime soon, but this is as exciting a moment to be watching Tesla as at any point so far this year. Two points support the bull case, but one technical risk still stands out.
Reason #1 to Buy: Momentum Indicators Are Flashing Green
The most immediate argument for the bulls is the technical setup. Tesla has bounced sharply off the $390 level, which acted as a floor several times last quarter when the bears ran out of steam. That level has once again attracted buyers, suggesting it remains a meaningful area of support and one the bears will need to break if they want to regain control.
In addition, Tesla’s momentum indicators are starting to flash green. Its MACD is on the verge of a bullish crossover, while its relative strength index (RSI) has begun rising after dipping into oversold territory. Individually, those signals are notable; together, they suggest short-term momentum has swung away from sellers and back toward buyers.
When a heavily watched stock like Tesla stabilizes at known support and momentum begins to flip, the risk/reward profile improves quickly. From current levels the downside looks more defined, while the upside opens back toward recent highs. That asymmetry is what makes this entry point attractive to some traders.
Reason #2 to Buy: Bullish Price Targets Reinforce the Technical Thesis
The technical case is being reinforced by analyst support. In recent weeks, teams at President Capital, RBC, and Stifel Nicolaus have reiterated Buy or equivalent ratings on Tesla, with refreshed price targets north of $500. From current levels, that implies roughly 20% upside—not bad for a roughly $1.35 trillion company.
That potential gain aligns neatly with the technical thesis. If the bulls are indeed kicking off a comeback rally from support around $390–$400, a move back toward $500 is not an unreasonable target. This level of analyst conviction adds weight to the idea that last week’s sell-off may have been the bears’ last roll of the dice.
As the chart shows, Tesla is rarely a stock that moves quietly. When momentum turns, it tends to do so rapidly and decisively. The current combination of support holding and bullish price targets creates a setup that is difficult to ignore.
One Reason to Sell: Valuation Risk After Trend Damage
For all the bullish arguments, there is an important problem that can’t be ignored. The selling that gathered pace through the start of February broke the uptrend that had been in place since last April. That’s significant: uptrends need to remain intact for sustained rallies to take shape. Once they’re broken, confidence often takes time to rebuild, and that is a clear risk for Tesla right now.
This breakdown also magnifies concerns about valuation. Tesla trades at a frothy multiple, which means investors may be far less forgiving if the bulls can’t maintain this uptick. If the current rebound fizzles, shares could roll over and confirm that a more sustained downtrend has begun.
In other words, this is a pivotal moment. The bulls have shown up at $390 and momentum is tilting in their favor. But if that support fails, the technical damage will deepen.
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