Trading Strategies For Tesla Stock Post Q3 Earnings Miss

Tesla, Inc TSLA was plunging about 13% lower Thursday after printing a fourth-quarter earnings miss, which Benzinga pointed out on Wednesday was a likely scenario due to a bear flag that had developed on the stock’s chart.

The EV giant reported fourth-quarter earnings per share of 71 cents on revenues of $25.17 billion, which missed a Street consensus estimate of earnings per share of 74 cents on revenues of $25.62 billion.

Traders and investors who played Tesla’s move to the downside by taking a position in the AXS Short Innovation Daily ETF SARK were enjoying about a 0.9% return on Thursday.

SARK is an actively managed ETF aiming to inversely track the daily performance of Cathie Wood-led ARK Innovation ETF ARKK, the latter which holds a 7.77% weighting of Tesla.

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The Tesla Chart: Tesla was breaking down from a bear flag on Thursday on higher-than-average volume, which indicates the pattern was recognized. The measured move of the flag is about 21%, which suggests Tesla could fall toward the $171 level over the next short-term period.

• The drop also confirmed the downtrend remains intact and the Jan. 22 high of $217.80 will serve as the most recent lower high within the formation. Eventually, Tesla will rebound at least temporarily to print at least another lower high.
• Bullish traders want to see Tesla eventually form a bullish reversal candlestick, such as a doji or hammer candlestick, to indicate the local bottom has occurred and a bounce is on the horizon. An impending bounce is likely to be followed by decreasing bearish volume.
• Bearish traders want to see the stock close Thursday’s trading session near the low-of-day, which could indicate selling will continue on Friday. If that happens, Thursday’s candlestick will be a bearish kicker candlestick, which could be followed by a second gap lower.
• Tesla has resistance above at $190.41 and at $200.51 and support below at $177.59 and at $166.71.
  
• Image sourced from Shutterstock