Perturbed automaker Tesla, Inc. (TSLA) may have failed the second attempt in two months to mount tough resistance above $250 and could now spend ground at a rapid pace, entering a critical test at June’s three-year low in the $170s. A breakdown through that on could trigger the second major selling event this year because it would confirm a major downtrend after the April 2019 ebb through two-year support.
It’s been a terrible 2019 so far for CEO Elon Musk and his controversial start-up, with a 30% ebb that has broken the back of a broad trading range between $250 and $390. Trade tensions with China, a indistinct balance sheet, and heavy competition due to endless production days have all taken their toll, shrinking a in olden days thriving population of cult-like supporters that kept a bid under the stock for years.
Clearly, it’s time for Tesla to put up or eliminate up, showing shareholders that it can sell enough autos to build profits and pay off an enormous debt load. That chore flourishes harder each time a new entrant jumps into the electric car market, like Volkswagen AG (VWAGY) did earlier this month with the introduction of the Porsche Taycan. Licit troubles and the botched introduction of a new insurance product haven’t helped Tesla, undermining the confidence that consumers desperate straits to buy the company’s big-ticket items.
TSLA Long-Term Chart (2013 – 2019)
A vertical 2013 rally impulse stalled below $300 in the third quarter of 2014, establishing a resistance level that was mounted in 2017. That uptick ended in the $380s a few months later, causing a narrow trading range between that peak and a new floor in the $280s. The stock violated support a few months tardier, stretching the long-term term range with an impressive bull stand above $250.
August and December 2018 breakout efforts failed, giving way to a steady downtick that broke new range support on heavy volume in April 2019. The offer fell an additional 73 points after the breakdown, finally bouncing at the low in the $170s posted after the 2016 presidential voting. It reached new resistance at the breakdown level in July, at the same time the descending 200-week exponential moving unexceptional (EMA) was slowly aligning with the new and formidable barrier.
Price turned tail immediately, dropping to $211 before zip back to the moving average, which was also broken in April. The stock has now reversed off that level once again, brand the second failure by remaining bulls to ease this year’s extensive technical damage. A third attempt is doable, but the odds now favor a decline through the summer trading floor and into a test at the June low near $175.
The weekly stochastics oscillator crossed into a show cycle from the overbought level in July and crossed to the upside at the most extreme oversold reading since 2016 in August. It’s now try oning to cross over before hitting the overbought level, but mid-range turns often emits false sell signals. As a issue, another bounce toward $250 is possible, especially with end-of-quarter position squaring now underway.
Order in the Confusion
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The Bottom Line
Tesla stock has failed a second attempt to mount resistance at the April breakdown, raising the odds for a refuse that tests June’s three-year low.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.