Tesla Bulls And Bears Battle It Out: What's Next For The Stock?

Tesla, Inc TSLA bounced up more than 8% off its opening price on Thursday in tandem with the general markets, which saw the S&P 500 spike 1.56% of the open before giving back all of its gains.

The counter rally to the upside is typical and expected in a bear market because just as stocks never go up in a straight line, securities also never go down in a straight line.

Like the S&P 500, Tesla has experienced five straight trading days in a row with bearish red candlesticks, closing each of those days lower than the stock opened to start the trading session, making a bounce imminent.

During the bounce, which topped out at the $759.66 mark, Tesla was unable to gain bullish momentum even though the trading volume was higher-than-average. This indicates the bears are firmly in control although a larger bounce, at least to print a lower high, is likely to come.

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The Tesla Chart: Tesla has been trading in a fairly consistent downtrend since April 4, with the most recent lower high printed at the $955.50 level on May 4 and the most recent low formed on May 2 at $848.03. Thursday’s low-of-day may mark the next lower low within the pattern although Friday’s candlestick will need to print for verification.

• Tesla may bounce higher over the coming days because the stock’s relative strength index (RSI) is measuring in at about 30%. When a stock’s RSI reaches or falls below that level it becomes oversold, which can be a buy signal for technical traders looking to play a bounce.
• If Tesla closes the trading day flat or above the $700 level, the stock will print a doji candlestick or hammer candlestick, respectively, which could indicate the stock will trade higher on Friday. If the stock closes the trading session below that level, it will print a long upper wick, which could indicate lower prices will come.
• At press time, Tesla’s trading volume had already surpassed its 10-day average, with over 30 million shares exchanging hands compared to 29.05. The higher-than-average volume indicates that there is a high level of interest in the stock, and combined with the volatile intraday trading, indicates a fierce battle is taking place between the bulls and the bears.
• Tesla has resistance above at $745.63 and $780.79 and support below at $720.95 and $700.

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