Tesla Shows Strength Versus S&P 500 Ahead Of Fed Interest Rate Decision: What's Happening?

Tesla, Inc TSLA was popping up over 4% on Friday in contrast to the general market, which saw the S&P 500 struggling to close flat.

The EV giant has missed out on the recent bull run in the general market, having declined over 16% between Oct. 13 and Friday, while the S&P 500 has gained over 10% during that time frame.

Tesla’s bearish price action is partly due to Elon Musk’s Oct. 28 Twitter acquisition, which was partly funded by Musk, who offloaded billions worth of Tesla shares to complete the deal.

Tesla’s weakness, paired with Amazon.com, Inc’s AMZN nearly 40% plunge since Aug. 16, has hindered the S&P 500, which temporarily crossed above the 200-day simple moving average on Nov. 30 in an attempt to negate the bear market.

With the Federal Reserve set to decide how high to raise the benchmark interest rate on Dec. 14, Tesla may chop mostly sideways leading up to the event. After that, the stock is likely to choose whether the bullish or bearish chart pattern that has developed becomes dominant.

Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.

The Tesla Chart: Tesla’s bullish pattern consists of a possible inverted head-and-shoulders formation that started to develop on Nov. 7. The left shoulder was created between that date and Nov. 15, the head was formed between Nov. 16 and Dec. 1 and the right shoulder forming over the days that followed.

• If the inverted head-and-shoulders is recognized and Tesla eventually breaks up through the descending neckline of the pattern, the measured move is about 20%, which indicates Tesla could surge up toward $238. If that occurs, Tesla will also confirm a new uptrend and regain the eight-day and 21-day exponential moving averages (EMAs) as support.
• The bearish chart pattern that’s developed is a possible bear flag pattern, with the pole created between Dec. 1 and Dec. 8 and the flag beginning to form on Friday. If Tesla continues to form a flag and eventually breaks down from the pattern, the measured move is about 14%, which suggests the stock could fall toward $154.
• If Tesla regains the eight-day EMA, the bear flag pattern will be negated but a downtrend could still be in the works. If Tesla closes Friday’s trading session with a significant upper wick, it could indicate lower prices and a continuation of the flag will take place on Monday.
• Tesla has resistance above at $190.41 and $200.51 and support below at $177.59 and $166.71.

Illustration via Shutterstock and Wikimedia.