Tesla Rebounds Following Post-Q3 Deliveries Meltdown: Here's What To Watch

Zinger Key Points
  • Despite reporting record sales for the third quarter, Tesla missed analyst estimates.
  • On Tuesday, Tesla was consolidating with an inside bar pattern on the daily chart.

Tesla Inc. TSLA was trading about 5% higher on Tuesday after a bearish day on Monday dropped the stock down over 8% off Friday’s closing price.

Despite the Austin, Texas-based company's record-setting deliveries for the third quarter, it missed analyst estimates. Tesla sold 343,830 cars compared to the consensus estimate of 360,000 vehicles for the quarter.

The bearish reaction to the news dropped Tesla’s relative strength index (RSI) into oversold territory, which indicated a bounce was likely to come on Tuesday.

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RSI is an indicator technical traders use to measure bullish and bearish price momentum. RSI levels can range between 0 and 100, with levels between 30 and 70 generally considered to be healthy.

When a stock’s RSI falls below the 30% level, it's considered to be oversold. When a stock enters oversold territory, it indicates the securities price no longer reflects the asset's true value, which can signal a reversal to the upside is in the cards.

When a stock’s RSI rises above the 70% area, it is considered to be overbought. When a stock enters overbought territory, it signals the securities price is elevated to its intrinsic value, which can signal a reversal to the downside is on the horizon.

RSI is best used when combined with other signals and patterns on a stock chart because stocks can remain in oversold and overbought territory for an extended period of time before reversing.

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The Tesla Chart: Tesla’s RSI dropped to the 30% level on Monday. On Tuesday, the higher prices allowed the RSI to rise up to about 38%.

The Elon Musk-led company opened higher on Tuesday, within Monday’s trading range and intraday, which has settled the stock into an inside bar pattern on the daily chart.

Late Tuesday morning, Tesla was attempting to break up bullishly from Monday’s mother bar and rise up into a gap between $255.16 and $262.47.

  • Tesla was struggling to break up bullishly from Monday's mother bar due to a lack of bullish volume on smaller time frames. If Tesla is unable to break up from the pattern later on Tuesday, further sideways consolidation may be needed.
  • If Tesla is able to completely fill the upper gap, bearish traders can watch to see if the stock prints a bearish reversal candlestick, such as a doji or shooting candlestick, at the top of the gap’s range. Bullish traders will want to increasing bullish volume drive the stock up through the top of the gap.
  • Tesla is trading in a confirmed and steep downtrend, with the most recent lower high formed on Sept. 28 at $289 and the most recent lower low printed at $241.01 on Monday. In order for the downtrend to be negated, Tesla will either need to soar up to print a higher high or consolidate down to print a higher low.
  • Tesla has resistance above at $254.98 and $271.71 and support below at $234.35 and $225.03.
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