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Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Technical Update - Tesla and Alphabet likely establishing bearish trends after earnings. Find key levels here
Kim Cramer Larsson
Technical Analyst, Saxo Bank
Tesla released its second quarter earnings results after the stock market closed on Tuesday. Investors reacted coolly and traded the stock down.
This morning the stock has traded down a further 9% in the pre-market to around 224 as indicated by the blue dashed line on the graph.
If Tesla closes today below support around 231.30, the stock closes the small gap from July 3, which could result in further selling.Next support is 218.90 which is likely to be tested, and the even stronger support around 209.86.
If Tesla on the other hand succeeds in closing back above 234.25, Tesla can return to its uptrend that can challenge, and perhaps even cancel, the top and reversal pattern (Doji Evening pattern in the circle) that was formed at the beginning of July.
The strength indicator RSI currently shows positive sentiment, indicating that Tesla can still trade higher than the top of the top and the reversal pattern. But if RSI closes below the 40 value, sentiment will swing to negative and a lower Tesla price should be expected in coming weeks.
A daily close below 131.30 will be the first strong indication that the negative scenario is likely to play out
In the medium term (the weekly graph) we can see that the Tesla share was rejected at the strong resistance around 265. Tesla must close above that price level to be able to continue and further develop a positive price trend. A scenario that currently seems very unlikely.
Alphabet C (google) also reported earnings in the aftermarket last night. It was immediately well received, but now in the pre-market the share has traded down to around 177 - dashed blue line on the graph.
If Alphabet closes below 179.20, which currently seems likely, it has confirmed and intensified the selling pressure that started on July 11.
Alphabet could very well test support at 173.50, maybe even today. A daily close below could further increase selling pressure to the stronger support level around 164.50 on the medium-term
164.50 is the upper price level of the gap area from April. A closing of that gap area will be very negative for Alphabet.
However, a more likely scenario if closing below 173.50 is that Alphabet C will be range bound between 173 and 165 for quite some time.
Currently – as of the closing yesterday – the RSI is showing positive sentiment but if closing below 40 threshold it will swing to negative supporting a bearish picture. Where RSI is closing is key!
Staying above 40 the Alpahbet C share price could recover.
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