Zinger Key Points
- Tesla is trading in downtrend, making a series of lower highs and lower lows.
- Bullish traders want to see the stock close near its high-of-day and regain the eight-day EMA.
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Tesla, Inc TSLA was trading over 4% higher on Tuesday, with continued momentum after a bullish day on Monday saw the stock bounce up from the 50-day simple moving average and rally 4.2%.
Cathie Wood added shares of the EV giant to two of her funds on Monday, purchasing a total of 26,700 shares across her ARK Innovation ETF ARKK and the ARK Next Generation Internet ETF (ARKW). The move comes after ARK added 69,329 shares last week.
Although Wood bought the temporary dip on Monday, the longer-term trend on Tesla’s chart points lower unless the stock can reverse from its current downtrend. A downtrend occurs when a stock consistently makes a series of lower lows and lower highs on the chart.
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The lower lows indicate the bears are in control while the intermittent lower highs indicate consolidation periods.
Traders can use moving averages to help identify a downtrend with descending lower timeframe moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term downtrend. Descending longer-term moving averages (such as the 200-day simple moving average) indicate a long-term downtrend.
The Tesla Chart: Tesla entered into a downtrend on Feb. 16 and has been making a consistent series of lower highs and lower lows. Tesla’s most recent lower high was formed on March 3 at $200.48 and the most recent lower low was printed at the $163.91 mark on Monday.
- On Tuesday, Tesla was attempting to break up above the eight-day exponential moving average (EMA) but finding rejection at that level. If the stock is able to break up above the eight-day, it would give bullish traders more confidence going forward.
- In order for Tesla to negate its current downtrend, the stock will either need to rise up above $201 or print a higher low above Monday’s low-of-day. If Tesla closes the trading day near its high-of-day price, the stock will print a bullish kicker candlestick, which could indicate higher prices will come again on Wednesday.
- Tesla has resistance above at $190.41 and $200.51 and support below at $177.59 and $166.71.
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