Tesla is about to break out to new highs, according to this chart. Here’s how to trade it

Tesla recently climbed out of bear market territory, and one chart-minded trader sees an even bigger comeback in the cards.

Shares of the electric auto maker surged 7 percent this week after Pepsi announced it preordered 100 of the new Tesla Semi trucks. The stock is still down more than 10 percent from its recent high, but the breakout leads Todd Gordon of TradingAnalysis.com to believe it could soon reclaim those levels.

"I like the consolidation that we've seen over the last several months, and we've just broken higher on news that Pepsi's going to put a pretty big order in for trucks," he said Thursday on CNBC's "Trading Nation." "That was the catalyst we needed to break out of the consolidation."

According to Gordon, a descending wedge pattern has formed in Tesla, along with a consolidation that is now serving as a support level just above $300. "We should be able now to get a little push up towards $400 in early 2018," said Gordon.

Furthermore, Gordon pointed out that the stock recently bounced off the lower end of an upward trend channel, and is making a run toward the higher end of that channel around $380, which Gordon believes is a key level for Tesla to break leading up to earnings in February.

To play for a move higher, Gordon bought the February 375/380 call spread for $1.25, or about $125 per options contract. Gordon would make a maximum reward of around $375 if Tesla closes above $380 on the Feb. 16 expiration.

But Gordon would lose the $125 he paid to make the trade if Tesla closes below $375 on Feb. 16. Therefore, he wants to establish a point at which to get out of the trade.

"If my options spread gets down to about 65 cents, half of the options premium that we just laid out is gone and it's probably time to get out of the trade and contain the risk," he said.

Shares of Tesla have surged 58 percent this year.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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