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Technical Update - Tesla: A falling knife. Catching it can hurt
Kim Cramer Larsson
Technical Analyst, Saxo Bank Group
Tesla is in a down trend on all time periods testing key support. Short lived correction could be seen but selling pressure is heavy and is likely to continue well in to 2023. Share price could drop to $110 before strong support
Tesla is bouncing around the support at around 154.50. 154.50 is the upper level of the Consolidation area back in Q3-Q4 2020 before the share price took off (again). That means that almost all investors in Tesla since Q4 2020 are now running a losing position.
A minor bounce should not be ruled out. That could materialize if Tesla closes the day today above 159.25 i.e., above yesterday’s open thus forming a Bullish engulfing candle. However, a potential bounce is likely to be short-lived and minor to test the upper short-term falling trend line on daily chart.
Trend is down on all time periods and indicators such as RSI and traded Volume are pointing to lower levels. The rising volume during the down trend, especially the past few weeks, confirms the selling pressure.
As mentioned in previous analysis' (as late as in yesterday’s analysis https://www.home.saxo/content/articles/equity/technical-analysis-tesla-apple-meta-amazon-14122022) Tesla could drop to 118-110 in Q1 2023.
That area is the lower level of the consolidation area from 2020 and is usually a bit stronger than the upper level of the consolidation area where we are currently trading.
There is no divergence on weekly RSI supporting this bearish view. To reverse the downtrend on the short-term a close above 200 is needed. But to reverse the medium-term down trend Tesla must close above 237.40.
RSI divergence explained: When the price of an instrument is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend
Author is holding a short position in Tesla
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