How To Trade Tesla Stock Before And After Q3 Earnings

Tesla, Inc TSLA was trading flat Wednesday as the company heads into its third-quarter earnings print after the close.

When Tesla printed mixed second-quarter earnings on July 20, the stock surged almost 10% higher the following day and continued to trade higher over the 10 trading days that followed before topping out at $313.61 on Aug. 4. Between that date and Wednesday, Tesla has declined almost 30%.

For the second quarter, Tesla reported revenue of $16.93 billion, which missed the $17.39-billion consensus estimate. The company reported earnings per share of $2.27, beating a consensus estimate of $1.91. Second-quarter deliveries came in at 254,695, up 27% year-over-year.

For the third quarter, analysts, on average, estimate Tesla will report earnings per share of $1 on revenues of $21.96 billion. Tesla reported on Oct. 2 that it delivered 343,830 vehicles in the third quarter.

Ahead of the event, Wells Fargo analyst Colin Langan maintained an Equal-weight rating on Tesla and lowered the price target from $280 to $230.

From a technical analysis perspective, Tesla’s stock looks bearish heading into the event, having settled into a possible bear flag pattern on the daily chart. It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.

The Tesla Chart: Tesla may have formed a bear flag pattern on the daily chart beginning on Sept. 29, with the downward sloping pole created between that date and Oct. 14 and the upward trending flag printed over the trading days that have followed.

• If the stock suffers a bearish reaction to earnings and drop down through the lower ascending trendline of the flag on higher-than-average volume, the measured move is about 27%, which indicates Tesla could drop toward $166.
• If Tesla receives a bullish reaction to its earnings print, the short uptrend that has taken place within the flag may continue. Tesla’s most recent higher high within the uptrend was formed on Tuesday at $229.82 and the most recent confirmed higher low was printed at the $209.45 level on Monday.
• If Tesla falls after printing its earnings, the stock’s relative strength index will drop into oversold territory, which could indicate a dip buy opportunity for a bounce.
• If the stock flies higher, a gap between $257.50 and $262.47 could fill, with the upper range of the gap acting as resistance.
• Tesla has resistance, in the form of price history, above at $225.03 and $234.35 and support below at $213.13 and $200.51.

See Also: Tesla Q3 Earnings Are Imminent. Can Nio Foreshadow What's To Come? What To Know Before The Print

Photo courtesy of Tesla.