You Ask, We Analyze: Is There A Bull Case For Tesla Stock?

Zinger Key Points
  • On May 18, Tesla broke down from a triangle pattern the stock had developed on the daily chart.
  • Tesla’s relative strength index (RSI) is measuring in at about 29%, which is oversold territory.
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On Sunday evening, Benzinga asked its followers on Twitter what they’re buying at the open on Monday. From the replies, Benzinga selected one ticker for technical analysis.

@BillyJamesG1, @Anujkalra05, @transposn and @craigjleblanc are buying Tesla, Inc TSLA.

Despite having to navigate over multiple obstacles since the COVID-19 pandemic began, Tesla has continued to ramp up its deliveries and on April 20, the electric vehicle company printed record first-quarter earnings, which beat consensus estimates handily.

Tesla continues to work toward increasing its production and recently announced a second shift has been added at its newest Gigafactory in Berlin.

On Tuesday, Tesla’s Shanghai Gigafactory will bring its output back to pre-lockdown levels, according to Teslarati report. Tesla’s Shanghai Gigafactory has been forced to shut down operations several times over the past couple of months due to record-level COVID-19 cases being reported in the country.

Despite the good news, Tesla has plummeted about 35% since printing its last financial statement and has been trading in a heavy downtrend since April 5, when the stock topped out at $1,152.87. Although Tesla appears likely to bounce soon, to at least print another lower high, the stock has a lot of work to do to give confidence to  bullish traders looking for more than just a quick scalp.

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The Tesla Chart: On May 18, Tesla broke down from a triangle pattern the stock had developed on the daily chart, which Benzinga called out the day prior. The break from the triangle came on higher-than-average volume, which indicated the pattern was recognized by the algorithms and since then, Tesla has continued to trade lower on bearish momentum.

  • At press time, the bulls and bears were battling over the stock, which was causing Tesla to print a doji candlestick, with both an upper and lower wick. The doji candlestick is an indecision signal, but can also indicate a reversal is in the cards.
  • The doji being printed was also inside Friday’s trading range, which has settled Tesla into an inside bar pattern. The inside bar in this case leans bearish because Tesla was trading lower after its formation, and because Monday’s inside bar was taking place at the lower range of Friday’s bar.
  • The stock will eventually bounce up higher, however, because Tesla’s relative strength index (RSI) is measuring in at about 29%. When a stock’s RSI reaches or falls below the 30% level, it becomes oversold, which can be a buy signal for technical traders.
  • Tesla has resistance above at $650.81 and $671.64 and support below at $628.35 and $546.98.

See Also: How to Read Candlestick Charts for Beginners

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