Tesla Tests Key Support: Is This a Deal? Or investment? | a cautious investor

There’s no denying that Tesla was a huge outlier. Among the Magnificent 7 stocks. While names like META have exploded into double-digit gains this week alone, TSLA is down about 38% from its July 2023 high and about 55% from its all-time high at the end of 2021.

Now Tesla is approaching a “confluence of support” where multiple technical analysis techniques agree on a specific level or range. Could now be the time for TSLA to finally find its footing? And how can we distinguish between a short-term mean-reversion bounce and a more sustained recovery?

It’s worth remembering that Tesla has had some serious outperformance in the first half of 2023, nearly tripling in value in just six months, easily outpacing the S&P 500. However, after the peak in July 2023, there was a fairly consistent, gradual decline in lows and highs.

Applying the Fibonacci framework over the past seven months shows a 38.2% retracement around $223. This is exactly where the first swing low occurred in August 2023. The next downswing stalled near the 50% retracement level at $200, which also pushed just below 200. – Daily moving average. The most recent pullback, which was basically Tesla’s early 2024 story, brought the price down to nearly the 61.8% retracement level of around $177.

Tesla is currently oversold and its RSI has been below 30 for the past few weeks. Previous lows in August and October 2023 also contained RSI near this level. Will we see another oversold bounce at Fibonacci support? We think so. But now let’s combine price momentum and price trend measures.

I drew a trend line starting from the high point in July 2023 to the high point in September, two months later. This trend line aligns well with subsequent highs in October and November, confirming the validity of this visual trend gauge. Pay attention to the failed breakout at the end of December. This has led to speculation that Tesla is starting to see a serious recovery. That couldn’t be the case as the price soon returned to the bearish channel.

Now notice how the price has come back to the lower limit of this trend channel. Now we have another chart technique that confirms potential support near $170, not far from the Fibonacci level of $177. So when testing the support created by two different technical approaches, the stock is oversold!

If we see a counter-trend bounce here, the real question will be whether this is the start of a broader rally, and potentially a return to the highs around $300 in July 2023. But the problem here is that resistance is joining in the $225-230 range. This is the 38.2% retracement mentioned earlier and the upper edge of the trend channel. The 50-day moving average and the 200-day moving average are actually at about the same level! So while the current oversold situation suggests that a near-term bounce is imminent, a break above the confluence of resistance would be necessary for a retest of the 2023 highs to be considered a real possibility.

Careful investors recognize that investing is not just about finding one indicator or one approach and then sitting back and reaping the rewards of buying and selling signals. Technical analysis is about the weight of evidence, taking into account the lessons of market history and recognizing the importance of when different technologies are lined up. Current charts suggest Tesla may be poised for a decent countertrend bounce.

RR#6,

dave

P.s Are you ready to upgrade your investment process? Check out our free behavioral investing course!

David Keller, CMT

Chief Market Strategist

StockCharts.com

disclaimer: This blog is for educational purposes only and should not be construed as financial advice. You should not use any of our ideas and strategies without first evaluating your personal and financial situation or consulting a financial professional.

The author had no positions in any securities mentioned at the time of publication. All opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.