The charts are making a strong case for Tesla heading into earnings

Tesla is set to report earnings Wednesday, and founder Todd Gordon says the charts are making a strong bullish case for the stock going into the event.

"Tesla's looking very good heading into earnings on Feb. 7," the trader said Friday on CNBC's "Trading Nation." "I like the technical position and I like the implied volatility of these options heading into earnings."

Gordon is referring specifically to the Elliott wave theory, which posits that stocks tend to move in a five-wave pattern. The trader believes that after seeing two rallies and two pullbacks, Tesla is in the middle of a fifth wave that will see it head up to complete its Elliott wave cycle.

"So heading into 2018 and into 2019, I'm bullish on this stock for a move up," he said, predicting that Tesla could even be close to $500 by the end of that wave.

Since the electric-car maker is scheduled to report earnings Wednesday, Gordon is looking to sell a bullish put spread given the spike in implied volatility heading into the event. He wants to sell the February 9 weekly 350-strike put and buy the February 9 weekly 345-strike put for a credit of $2.23. This means that if Tesla closes above $350 on Feb. 9 expiration, then Gordon would make a maximum profit of $223.

However, if Tesla were to close below $345 on that day, Gordon would face a maximum loss of $277. On Friday, the stock was trading at about $345, below the break-even level of $347.95.

Tesla is up 11 percent year to date.


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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.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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