Tesla's Stock Confirms This Key Pattern As Elon Musk-Predicted Recession Fears Grow

Tesla, Inc TSLA was falling over 4% on Monday in sympathy with the SPDR S&P 500, which was trading over .5% lower but showing a death cross on the daily chart, where the 50-day simple moving average (SMA) crosses below the 200-day SMA.

Earlier in the day, Tesla’s CEO Elon Musk challenged Russian President Vladimir Putin to a “single combat” fight on Twitter, for which the winner would receive Ukraine. The tweet is as unlikely to have affected Tesla’s stock price as the idea that the two would ever actually meet to brawl.

The worry of a looming recession is more likely the culprit that is causing the general market, and Tesla, to continue to decline. On Dec. 30, Musk made an ominous post on Twitter in which he predicted a recession would take hold in the spring or summer of 2022.

During the last recession, which began on Dec. 1, 2007 and ended on May 31, 2009, the SPY declined 54.72% before beginning to reverse course. Tesla didn’t go public until June 2010, but for comparison, Ford Motor F plummeted 86.57% between Dec. 3, 2007 and Nov. 20, 2008 before reversing to the upside to end the official period of the recession about 20% lower.

It is yet to be seen whether a full-blown recession will take hold over the coming months, or whether macroeconomic and geopolitical developments can lift the market from danger. Despite the concern, Tesla is likely to adhere to patterns and levels on the chart even if the stock does continue to fall lower.

See Also: Elon Musk's New Ukraine Tweets: What Is The Tesla Chieftain Saying?

The Tesla Chart: Tesla has been trading in a falling channel pattern on the daily chart since March 1 and on Monday the stock tested the bottom descending trendline of the pattern as support and held above it. The pattern is considered bearish until a stock breaks up bullishly from the upper descending trendline of the channel on higher-than-average volume.

Within the channel, Tesla is trading in a confirmed downtrend, making a consistent series of lower highs and lower lows. Aggressive bulls and bears may choose to enter and exit positions based on the trendlines of the patterns, with bullish traders entering at the bottom trendline and selling at the top of the pattern and bears entering into short positions at the top of the pattern and covering their positions at the bottom.

If Tesla continues to trend lower, or falls through the bottom of the channel, its relative strength index will eventually reach into oversold territory. When a stock’s RSI reaches or falls below the 30% level it can be a buy signal for technical traders and Tesla’s RSI is currently measuring in at about 36%.

Tesla is trading below the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending below the 21-day, both of which are bearish indicators. The stock is also trading below the 50-day and 200-day SMAs, which indicates long-term sentiment is bearish.

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• Bulls want to see big bullish volume come in and break Tesla up from the falling channel pattern, which will negate the downtrend. Tesla has resistance above at $780.79 and $821.
• Bears want to see Tesla continue to trade lower within the pattern or for big bullish volume to come in and drop the stock through the bottom of the channel and below the Feb. 24 low-of-day at the $700 mark. Before potentially reaching that level, Tesla has support at $745.63 and $720.95.