Stock of the day: Tesla
16 August 2023
In today's financial spotlight, we turn our attention to Tesla, the pioneering electric vehicle manufacturer, which is currently navigating through some turbulent market waters. Remarkably, Tesla's stock is at its lowest ebb since the beginning of June, which raises a significant question: What is steering this movement?
In mid-July, we observed an intriguing development—a false breakout above a downtrend line, which we have highlighted in yellow on the chart. This move was concurrent with a test of the upper boundary of a flag formation, illustrated with black lines on our chart. Rather than breaking free of these constraints, Tesla's stock recoiled from this upper flag line. It retreated back beneath the downtrend line, thereby activating a clear sell signal in the process.
Since that pivotal moment, the stock has been on a gradual but consistent descent. By the second week of August, it had navigated its way down to a significant horizontal support level, pegged at $240 and marked in green on our chart. This was a crucial juncture for Tesla, and the market watched with bated breath.
Fast forward to this week, and we’ve witnessed Tesla's stock price breaking through this green support line. This development further solidifies the prevailing negative sentiment around this stock, endorsing the notion that we are in 'sell' territory.
As we look ahead, the immediate target that emerges is the lower boundary of the flag formation—our second black line on the chart. The odds of Tesla reaching this line appear increasingly likely—in fact, it seems almost a foregone conclusion given the current momentum.
However, what transpires at this lower flag line will be pivotal for Tesla’s stock and will set the tone for its future trajectory. A break below this line would unleash a long-term sell signal, potentially opening the door for a more extended bearish phase for Tesla.
Conversely, if the stock price were to bounce off this lower flag line and ascend back above the green $240 mark, that would constitute a bullish reversal signal, inviting investors to consider going long on Tesla.