Ominous Death Cross Forms On Tesla's Chart

If history is any guide, there may be trouble ahead for shares of Tesla, Inc. TSLA. A so-called "death cross" has formed on its chart and, not surprisingly, this could be bearish for the stock.

What To Know: Many traders use moving average crossover systems to make their decisions.

When a shorter-term average price crosses above a longer-term average price, it could mean the stock is trending higher. If the short-term average price crosses below the long-term average price, it means the trend is lower.

See Also: Tesla's Stock Pulls Back After Q2 Earnings: What Do Analysts Think?

Why It's Important: The 50-day and the 200-day moving averages are commonly used. The death cross occurs when the 50-day moves below the 200-day. This could mean the long-term trend is changing.

That just happened with Tesla, which is trading around $646.16 at publication time.