Tesla's Stock Gets Pulled Down By Market Turmoil, But Will It Hold This Bullish Pattern?

Tesla, Inc TSLA will be required to pay thousands of its electric vehicle owners $16,000 USD each if the automaker and technology company declines to appeal a judgement delivered in a Norwegian court, according to an Electrek report.

The judgement found that a series of Tesla’s software updates, specifically 2019.16.1 and .2, reduced the charging speed and battery capacity of a number of Tesla’s EV models. Owners in the country also reported the speed at which Tesla’s Supercharger stations recharge the EV’s batteries has also been reduced.

The news had little effect on Tesla’s share price, which opened higher and rose up 1% off the open but overall market weakness and a bearish reaction to a chart pattern managed to bring the stock down intraday.

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The Tesla Chart: On Nov. 5 after reaching a Nov. 4 all-time high of $1,243.49, Tesla attempted a blue-sky run but instead printed a bearish double top pattern near the level and entered into a period of consolidation. In its consolidation, the stock has formed a pennant pattern on the daily chart with the most recent price action printing lower highs and higher lows. The pattern is considered to be bullish because Tesla was trading higher before forming the pennant. 

Tesla is set to break from the pennant pattern on Dec. 7 when the stock price will meet the apex of the formation. When Tesla breaks up or down from the pattern, both bullish and bearish traders will want to watch for high volume to gauge whether the pattern was recognized. On Wednesday, the stock attempted to break up from the pattern but rejected the upper trendline and wicked from it.

There are three gaps on Tesla’s chart, and because gaps fill about 90% of the time it is likely Tesla will trade into each of the empty ranges in the future. The higher gap falls between $1,197 and $1.208; the closer lower gap is between the $910 and $944.20 range and there is another lower gap between $843.21 and $849.74.

Tesla is trading above the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending above the 21-day, both of which are bullish indicators. The stock is also trading above the 50-day simple moving average, which indicates longer-term sentiment is bullish.

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• Bulls want to see big bullish volume come in and break Tesla up from the pennant pattern. Above the upper trendline of the pennant there is no significant resistance before the previous all-time high.
• Bears want to see big bearish volume enter into the stock to break Tesla down from the pattern. The stock has support below near $1,075 and $1.045.