Tesla Faces Uncertain Path After Xi Jinping's Covid Restrictions Threaten Production: What's Going On?

Zinger Key Points
  • Tesla printed a hanging man candlestick on Friday, which indicated the temporary top may be in.
  • If Tesla falls lower, bullish traders want to see the stock print a triple bottom pattern near $166.
Tesla Faces Uncertain Path After Xi Jinping's Covid Restrictions Threaten Production: What's Going On?

Tesla, Inc TSLA was up over 1% on Monday morning after trading flat during Friday’s shortened trading session.

Rare protests erupted in China over the weekend after the government continued to tighten its COVID-19 restrictions. Lockdowns in Shanghai, where half of Tesla’s global production is manufactured, threaten the EV giant's revenues for the fourth quarter, which is usually a seasonally strong period for the company.

During the second quarter, forced shutdowns at Tesla’s Gigafactory Shanghai amid surging COVID-19 cases contributed to the company missing revenue expectations.

Tesla has been trading in a steep and consistent downtrend since Sept. 21, plunging over 47% to reach a Nov. 22 52-week low of $166.19. Although Tesla bounced about 10% from that low, the stock may have merely formed another lower high within the downtrend.

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The Tesla Chart: Tesla printed a hanging man candlestick on Friday, which indicated the stock was likely to trade lower on Monday. Friday’s high-of-day at $185.20 may be the most recent lower high, although that will need to be confirmed with the occurance of a new 52-week low over the next few trading days.

  • If Tesla trades lower but forms a reversal candlestick near the $166 area, the stock may print a triple bottom pattern when paired with similar price action at that level on Nov. 21 and Nov. 22. If that happens, it could indicate the downtrend is over and a bull cycle will take place.
  • If Tesla makes a new 52-week low over the next few days, the bullish divergence, which began to occur on Nov. 21, may become stronger. A bullish divergence occurs when a stock makes a series of lower lows, but its relative strength index makes a series of higher lows.
  • Tesla has resistance above at $190.41 and $200.51 and support below at $177.59 and $166.71.

See Also: Elon Musk Says Tesla Co-Founder Eberhard 'Was Wealthy And Could Have Risked His Money, But...'

Photo: Courtesy of tesla.com and TED Conference on flickr

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