Here's Where Tesla May Find Support If The Stock Continues To Drive South

Tesla, Inc TSLA was struggling to trade flat on Thursday after dropping to a new 10-week low earlier in the trading session amid rising concerns that the Federal Reserve’s battle with inflation will continue with further rate hikes.

The EV giant has been trading in a downtrend since July 20, the day the stock suffered a bearish reaction to its quarterly earnings print. A downtrend occurs when a stock consistently makes a series of lower lows and lower highs on the chart.

The lower lows indicate the bears are in control while the intermittent lower highs indicate consolidation periods.

Traders can use moving averages to help identify a downtrend with descending lower timeframe moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term downtrend.

Descending longer-term moving averages (such as the 200-day simple moving average) indicate a long-term downtrend.

If Tesla, and other stocks that are heavily weighted within the S&P 500 continue to drop lower, volatility in the stock market is likely to increase. Traders wishing to play the potential volatility in the stock market can use MIAX’s SPIKES Volatility products. The products, which are traded on SPIKES Volatility Index SPIKE, track expected volatility in the SPY over the next 30 days.

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The Tesla Chart: Tesla’s downtrend has been taking place under a descending trend line, which has been acting as heavy resistance. The descending trend line is likely to continue to guide Tesla lower but an eventual break up from the pattern could signal a longer-term rebound.

• On Thursday, Tesla was working to form a hammer candlestick on the daily chart, which could indicate a bounce is on the horizon for Friday. If that happens, bullish traders want to see big bullish volume drive Tesla over the trend line, while bearish traders want to see the trend line continue to act as resistance.
• Tesla’s most recent lower high within the downtrend was formed on Aug. 10 at $251.80 and the most recent confirmed lower low was printed at the $242.76 level on Aug. 7. If Tesla bounces on Friday, Thursday’s low-of-day will serve as the next lower low within the downtrend.
• Tesla is trading under the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending under the 21-day, which is bearish. The stock is also trading under the 50-day simple moving average. If Tesla continues to fall lower, the 200-day SMA is likely to act as support at least temporarily.
• Tesla has resistance above at $225.03 and at $234.35 and support below at $213.13 and at $200.51.