Tesla Hits 14th Floor, Drops Lower: A Technical Analysis Of Elon Musk-Led Stock

Tesla, Inc TSLA edged over 5% higher this week but on Wednesday, the stock hit major resistance near the top of an upper gap and closed under the level, printing a hanging man candlestick to finish off the trading session.

The hanging man candlestick suggests lower prices are on the horizon, although that isn’t necessarily a bad sign for bullish traders. The top-out came after a 13-day winning streak, which ended on Wednesday.

Tesla has been trading in an uptrend since April 27, but hasn’t printed a higher low within the pattern since May 31 – the day before the stock regained support at the 200-day simple moving average.

An uptrend occurs when a stock consistently makes a series of higher highs and higher lows on the chart. The higher highs indicate the bulls are in control, while the intermittent higher lows indicate consolidation periods.

Traders can use moving averages to help identify an uptrend, with rising lower time frame moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term uptrend.

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The Tesla Chart: While continuing in its uptrend, Tesla tapped resistance near $262.50 and was rejected from the area. The gap was created on Oct. 3, 2022, but the upper range of the level hasn’t been filled and holds strong.

• There’s also a more recent lower gap that exists between $235.23 and $242.02 which is likely to be filled in the future. When Tesla retraces to form at least its next higher low, that gap may fill and traders can watch for a reversal candlestick, such as a doji or hammer candlestick, to form near the lower range of the gap.
• Bullish traders want to see the hanging man candlestick negated and for Tesla to continue its bullish run north on Thursday. If that happens, a pullback is likely on the horizon because Tesla’s relative strength index is measuring in at almost 87%, which indicates the stock is overbought.
• Tesla has resistance above at $271.71 and $285.83 and support below at $254.98 and $234.35.

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