Trading Strategies For Tesla Stock Before And After Q2 Earnings

Tesla, Inc TSLA was trading slightly lower Wednesday as the company kicks off big tech earnings season with its quarterly report after the close.

When Tesla printed a first-quarter revenue beat on April 19, the stock closed the following session over 10% lower, but on April 27, Tesla reversed into a strong uptrend that has seen the stock gain about 92% since that date.

For the first quarter, Tesla reported revenue of $23.33 billion, which beat the $23.21-billion consensus estimate. The company reported earnings per share of 85 cents, in line with the Street estimate. Despite headwinds during the first quarter, Tesla reported record deliveries.

For the second quarter, analysts, on average, estimate Tesla will report earnings per share of 82 cents on revenues of $24.48 billion.

Tesla delivered 442,875 vehicles, up 36% year-over-year, in the first quarter. In the second quarter, the company delivered 466,140 vehicles, an increase of approximately 83% year-over-year.

Ahead of the event, three analysts weighed in on Tesla stock. Wells Fargo maintained an Equal-Weight rating on Tesla and raised a price target from $170 to $265. Wedbush analyst Daniel Ives reiterated an Outperform rating and maintained a price target of $300 and Morgan Stanley analyst Adam Jonas reiterated an Equal-Weight rating with a $250 price target.

From a technical analysis perspective, Tesla’s stock looks neutral heading into the event, trading in an uptrend but in need of a pullback. 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.

Tesla and Netflix will set the stage for this earnings season, and a negative reaction to the companies' quarterly reports could increase volatility in the stock market. Traders wishing to trade the volatility in the stock market can use MIAX’s SPIKES Volatility products. The products, which are traded on SPIKES Volatility Index SPIKE, track expected volatility in the SPDR S&P 500 over the next 30 days.

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The Tesla Chart: Tesla broke up from a bull flag pattern on July 13, which Benzinga called out was likely to occur on July 7. So far, Tesla has completed about 10% of the implied 18% total move north.

• The stock is also trading in a long-term uptrend, with the most recent higher low formed on July 10 at $261.38 and the most recent confirmed higher high printed at $284.25 on July 3. If Tesla breaks higher following its earnings print, bears can watch for the stock to eventually print a bearish reversal candlestick, such as a doji or shooting star candlestick, to signal the local top has occurred.
• A retracement is likely to take place over the next few days because Tesla’s relative strength index is measuring in at about 72%. When a stock’s RSI reaches or exceeds the 70% area, it becomes overbought, which can be a sell signal for technical traders.
• Bulls want to see Tesla receive a bullish reaction to its earnings and then for big bullish volume to drive the stock above $300. If Tesla can regain that level, it could become solid support.
• Tesla has resistance above at $300.90 and at $315.42 and support below at $285.83 and at $271.71.

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Photo courtesy of Tesla.