Key Takeaways
- Tesla shares were little changed early Tuesday after falling 4% yesterday amid uncertainty over new California electric vehicle tax credits and bearish commentary from analysts at UBS.
- The stock’s recent bullish price momentum may have temporarily hit the skids after the shares initially climbed to their highest level in more than two years on Monday before undergoing an intraday reversal to close near the day’s low.
- Investors should watch key support levels on Tesla’s chart around $310 and $265, while watching a bullish bars pattern price target near $500.
Tesla (TSLA) shares were little changed early Tuesday after falling 4% yesterday amid uncertainty over new California electric vehicle (EV) tax credits and bearish commentary from analysts at UBS.
On Monday, California Governor Gavin Newsom said that the state would provide EV tax credits if the Trump administration removed them at the federal level. However, Newsom added that the rebates would promote innovation and competition in the zero emission vehicle (ZEV) market, suggesting that they would apply to smaller EV makers than Tesla.
Sentiment may have also taken a dent yesterday after UBS analyst Joseph Spak said in a research note that the stock’s recent post-election run up had been driven by “animal spirits,” rather than fundamental changes at the company.
Tesla shares have surged around 35% since election day, with investors betting that CEO Elon Musk’s close relationship with the President elect will benefit the automaker, possibly through eased self-driving regulations. The stock was up slightly at around $339 in recent premarket trading Tuesday.
Below, we take a closer look at the technicals on Tesla’s chart and identify important price levels worth watching out for.
Intraday Reversal
After breaking out from an ascending triangle earlier this month following Donald Trump’s election victory, Tesla shares trended higher for about a week before consolidating in a pennant, a chart pattern that signals a continuation of the stock’s current uptrend.
However, Tesla’s recent bullish price momentum may have temporarily hit the skids after the shares initially climbed to their highest level in more than two years on Monday before undergoing an intraday reversal to close near the day’s low. Moreover, the relative strength index (RSI) turned lower to form a head and shoulders-like topping pattern on the indicator.
Let’s use technical analysis to locate key support levels on Tesla’s chart that investors may watch during a pullback and forecast a bullish price target to monitor if the stock resumes its move higher.
Key Support Levels to Watch
Firstly, it’s worth keeping an eye on the $310 level, a location on the chart where the shares could attract buying interest near the low of the pennant pattern.
A breakdown below this level could see the shares fall to around $265. This area — around 22% below Monday’s closing price — would likely encounter significant support from the ascending triangle’s top trendline, a region that currently sits in close proximity to the rising 50-day moving average.
Bullish Price Target to Monitor
To forecast a bullish target, investors can use a bars pattern, a chart-based technique that analyzes prior price bars to predict future moves.
When applying this tool to Tesla’s chart, we take the trending price bars that immediately preceded the pennant and reposition them from the pattern’s top trendline. Doing so projects a target of around $500, the price the stock may reach if a bullish continuation move plays out.
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As of the date this article was written, the author does not own any of the above securities.