Tesla Shares Settle Into This Pattern Under Key Area As Automaker Prepares To Host Investor Day: What's Next?

Tesla Inc TSLA was retracing slightly lower on Tuesday after a big bullish day on Monday saw the stock rally 5.46%, moving counter to the general market, the latter of which closed lower.

At 4 p.m. EST Wednesday, Tesla will host its Investor Day, when analysts expect the EV giant to more a more cost-effective vehicle, a Cybertruck delivery update and a 4680 battery technology and scale update, among other things.

If Tesla receives a positive reaction to its event the next day, the stock could break up from a triangle pattern it started trading in on Feb. 16 and confirmed on Tuesday by rejecting the upper trendline of the formation.

A symmetrical triangle pattern is created when a stock forms a series of lower highs and higher lows between a descending and an ascending trendline, which meet on the right side of the chart to form an apex. The pattern indicates that the bulls and bears are equally in control.

A symmetrical triangle is often formed on lower-than-average volume and demonstrates a decrease in volatility, indicating consolidation. The decreasing volume is often followed by a sharp increase in volume when the stock breaks up or down from the pattern, which should happen before the stock reaches the apex of the triangle.

• Aggressive bullish traders may choose to purchase a stock in a symmetrical triangle when the security reverses course on the lower ascending trendline, with a stop set if the stock rejects at the upper descending trendline of the pattern. More conservative traders may wait for the stock to break up bullishly from the pattern on higher-than-average volume.
• Aggressive bearish traders may choose to trade opposite to the bulls, entering into a short position on a rejection of the upper descending trendline and covering the position if the stock finds support at the lower trendline. Opposite to the bulls, conservative bearish traders may wait for the stock to break down from the lower trendline on higher-than-average bearish volume.

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The Tesla Chart: Tesla is set to meet the apex of the triangle on March 16 and traders can watch for the stock to break up or down from the pattern on higher-than-average volume to gauge the future direction. If Tesla’s Investor Day is bullish for the stock and Tesla breaks up from the triangle, it may find resistance at the 200-day simple moving average (SMA).

• The 200-day SMA is a heavy area of both support and resistance, which makes it difficult for a stock to slide through the area on the first attempt. If Tesla is able to regain the 200-day after breaking up from the triangle, bullish traders could gain confidence that a larger uptrend was on the horizon.
• On Tuesday, Tesla was working to print a bearish Marubozu candlestick, which could indicate lower prices will come on Wednesday. The second most likely scenario is that the stock trades sideways to form an inside bar.
• Tesla has resistance above at $213.13 and $225.03 and support below at $200.51 and $190.41.

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Photo: Courtesy Tesla