Technical Analyst, Saxo Bank
Summary: Tesla seems to be failing in closing the bearish gap created after disappointing earnings in April. An attempt Friday was demolished by Sellers taking control forming a bearish candle on the chart.
Perhaps a contributing factor in sellers coming in is that Lithium prices, which are a main cost input for Tesla, are on the rise after collapsing earlier this year
Tesla formed a gap after Earnings release 20th April. That gap – a body gap after the body of the candles, we do not take into account the shadows of the candles i.e., high and low of the day - must be closed for Tesla to have the potential to resume uptrend. That means Tesla needs to close above 179.10.
Friday buyers tried from the opening, but sellers took immediate control selling Tesla throughout the session resulting in a Bearish Engulfing candle and the gap to persist.
Indicators are painting a bearish picture for Tesla. The share price is currently below 55, 100 and 200 Moving Averages and RSI is still showing negative sentiment. RSI and needs to close above 60 threshold to reverse to positive sentiment. And Tesla seems to be rejected at the lower part of the Ichimoku Cloud (shaded are).
If Tesla closes below the short-term rising trendline support at 159.97 is likely to be tested. A close below 159.97 the April low at 152.37 is likely to be tested. Then the Run away gap from January is in play. If that gap is closed i.e., a close below 144.43 selling pressure is likely to intensify further.
Medium-term Tesla is in a down trend on the weekly chart. Not even being able to test upper falling trend line and RSI is negative suggesting Tesla is likely to trade lower in coming weeks and months.
To reverse this bearish scenario the gap from April must be close short-term i.e., a close above 179.10. To reverse the medium-term downtrend a close above 207.80 is needed.
A note from Peter Garnry, Head of Equity Strategy on Lithium prices:
The biggest cost input for Tesla is the Lithium price. The Lithium price has collapsed since New year which is most likely the main reason Tesla on several occasions has lowered the price on their cars.
But now Lithium prices seem to be rebounding and if rebounding further it will hurt Tesla earnings
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