Tesla's Stock Gears Down Into This Pattern Amid Market Weakness: Watch To Watch On A Shorter Timeframe

Tesla, Inc TSLA gapped down 4.36% on Monday morning, as an overreaction to the S&P 500, which gapped down 0.53% lower to start the trading session.

Since April 4, the EV manufacturer has been trading in a descending channel pattern on the four-hour chart, making lower lows and lower highs between two parallel trendlines. The pattern is bearish for the short term but can be bullish down the road.

For bearish traders, the "trend is your friend" (until it's not) and the stock is likely to continue downwards. Aggressive traders may decide to short the stock at the upper trendline and exit the trade at the lower trendline.
Bullish traders will want to watch for a break up from the upper descending trendline, on high volume, for an entry. When a stock breaks up from a descending channel, it's a powerful reversal signal and indicates a rally is likely in the cards.
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The Tesla Chart: When Tesla gapped down on Monday morning, the stock hit a support zone at $978.60, which aligns with the 200-day simple moving average (SMA), where bulls came in and bought the dip. Tesla then shot up to test the upper descending trendline of the falling channel as resistance but was unable to break through the pattern, which caused the stock to form an upper wick.

Bullish traders will want to see Tesla continue to hold above the 200-day SMA as support. The 50-day SMA has been trending upwards recently, and if Tesla continues to trade above the 200-day SMA the 50-day will eventually cross above it, which will form a golden cross on the four-hour chart.
Tesla’s most recent lower high in its downtrend was printed on April 7 at $1,076.50 and the most recent confirmed lower low was printed on the same trading day at the $1,021.54 mark. If Tesla closes the Monday’s session near its high-of-day price, it could indicate the next lower low has been formed and the stock will trade higher on Tuesday.
If Tesla closes the trading session below the $1,000 level, it will form an upper wick, which could indicate lower prices are in the cards before a bounce takes place.
Tesla has two gaps above, with the first created on Monday between $1,008.37 and $1,025 and the second between the $1,079 and $1,087.30 range. Gaps on charts fill about 90% of the time, which makes it likely Tesla will rise up to fill both empty trading ranges at some point in the future.
Tesla has resistance above at $1,045.02 and $1,075.02 and support below at $978.60 and $945.