There isn’t any denying that Tesla has been a big-time outlier out of the Magnificent 7 shares. Whereas names like META have exploded to double-digit positive aspects simply this week, TSLA is down about 38% from its July 2023 excessive and about 55% off its all-time excessive in late 2021.

Now, Tesla is approaching a “confluence of assist” the place a number of technical evaluation strategies agree on a selected stage or vary. Will this be the time when TSLA lastly finds its footing? And the way can we differentiate a short-term imply reversion bounce from a extra sustained restoration?

It is price remembering that, within the first half of 2023, Tesla was a severe outperformer, handily outpacing the S&P 500 because it nearly tripled in worth in simply over six months. However after the July 2023 peak, it has been a reasonably constant stepwise downtrend of decrease lows and decrease highs.

Making use of a Fibonacci framework to the final seven months exhibits a 38.2% retracement round $223, proper about the place the primary swing low occurred in August 2023. The following downswing stalled out across the 50% retracement stage at $200, which additionally pushed just under the 200-day transferring common. The newest downswing, which has principally been the story of early 2024 for Tesla, has pushed the worth all the way down to nearly the 61.8% retracement stage of round $177.

Tesla is at the moment oversold, with an RSI beneath 30 for the final couple weeks. Earlier swing lows in August and October 2023 additionally concerned an RSI round these ranges. Will we see one other oversold bounce off Fibonacci assist? We predict so. However now, let’s mix the worth momentum with a gauge of worth development.

Ranging from the July 2023 excessive, I’ve drawn a trendline linked to the height two months later in September. That trendline coincides properly with subsequent highs in October and November, confirming the validity of this visible development gauge. Be aware the failed breakout in late December, which definitely had me speculating that Tesla was starting to mount a severe restoration. It was to not be, as the worth quickly returned to the downtrend channel.

See how the worth has now pushed again to the decrease boundary of this development channel? Now we’ve one other charting approach confirming potential assist round $170, not removed from the Fibonacci stage of $177. So a inventory is oversold because it assessments assist generated from two totally different technical approaches!

If we do see a countertrend bounce right here, the actual query might be whether or not that is the start of a broader advance, probably main again to the July 2023 excessive round $300. However the issue right here is we’ve a confluence of resistance across the $225-230 vary. That is the 38.2% retracement we talked about earlier, in addition to the higher fringe of the development channel. The 50-day and 200-day transferring averages are literally proper round that very same stage as properly! So, whereas the present oversold circumstances recommend a short-term bounce is imminent, I would want to see a break above that confluence of resistance to think about a retest of the 2023 excessive as an actual risk.

Conscious traders acknowledge that investing is not only about discovering one indicator, or one strategy, after which simply sitting again and reaping the rewards of its purchase and promote indicators. Technical evaluation is extra in regards to the weight of the proof, contemplating the teachings of market historical past, and recognizing the significance of when a number of strategies line up. For now, the charts recommend Tesla could also be ripe for an honest countertrend bounce.

RR#6,

Dave

P.S. Able to improve your funding course of? Take a look at my free behavioral investing course!

David Keller, CMT

Chief Market Strategist

StockCharts.com

Disclaimer: This weblog is for academic functions solely and shouldn’t be construed as monetary recommendation. The concepts and methods ought to by no means be used with out first assessing your individual private and monetary state of affairs, or with out consulting a monetary skilled.

The creator doesn’t have a place in talked about securities on the time of publication. Any opinions expressed herein are solely these of the creator and don’t in any manner characterize the views or opinions of another individual or entity.