Can Tesla Avoid a Crash?

Take a look at Tesla’s bonds, and you might wonder if the company is careening towards that Great Center Divider in the Sky.  Yet, TSLA stock has held on to some important levels of technical support.  Setting aside the considerable, robust debate and analysis, what do the charts say?

I’m a big believer in logarithmic charts, especially for stocks like TSLA which have increased in price so dramatically.  The logarithmic scale chart portrays a stock which has struggled to remain above a channel midline, and has plenty of downside potential should it ever drop to the channel bottom.

The arithmetic version, on the other hand, illustrates a stock which has successfully bounced at critical points along its channel bottom.  Its channel bottom is much closer, but the risk entailed in even a mild selloff is also considerable.

Regardless of which perspective one chooses, the stock has traded in a broad band since late 2013 — crisscrossing its 200-day moving average dozens of times.

IMO, the most important chart feature has been the horizontal line at roughly 290.  It served as resistance between Sep 2014 and Apr 2017, when TSLA pushed up through it and it became support.The support didn’t hold, however.  After several backtests, TSLA finally plunged through it (also, the neckline of a large H&S Pattern) on Mar 27.  From the next morning’s post:  More Where That Came From…

The following morning, TSLA gapped even lower — threatening a breakdown before genius Elon Musk inexplicably did something very stupid.

Rudy Giuliani Public Relations?

In perhaps the most ill-advised April Fools joke since United Airlines announced their new concierge deplaning service, Musk tweeted that the company had gone bankrupt.

Despite intense efforts to raise money, including a last-ditch mass sale of Easter Eggs, we are sad to report that Tesla has gone completely and totally bankrupt.  So bankrupt, you can’t believe it.”

I can only surmise that Rudy Giuliani must have surreptitiously been brought on board to direct Tesla’s public relations.  Needless to say, investors weren’t amused.

The stock gapped lower the next day.  For all intents and purposes, it had broken down — along with many other indices and market leaders.  It was a dangerous moment for the market, which explains what happened next.

SPX had closed below its 200 DMA on Apr 2.  On the 4th, SPX (and virtually every major index) benefited from a coordinated (Bullard and Kudlow) effort to prop up stocks [see: The Market’s Latest “Lucky” Bounce] on the 4th.

TSLA joined in, rallying 14% that day and another 6% the following day — putting it safely back above the H&S neckline and horizontal support.

But, the autopilot is clearly malfunctioning.  The stock has gone sideways for five weeks, repeatedly dropping back through its neckline and conspicuously failing to break out.  Today, it reinforced the notion that it’s in trouble by failing to follow through on the latest bounce (inspired by Musk’s $10 million open market purchase – the yellow arrow.)Perhaps TSLA will join AAPL, AMZN, FB and countless other stocks which have have driven their shares higher by promising to give you some of your own money back.

It has neckline support at 290 and trend line support at 270ish.  Unless it drops below that support, resist that urge to short it.

But, if it fails (again) to hold, nothing will have changed since that Mar 28 chart targeting 193 — a deep retracement of the post-Trump election lows.  Stay tuned.





Comments are closed.