Tesla Looks Geared Up To Print Reversal Signal, Indicating A Bounce Is In The Cards: The Bull, Bear Case

Tesla, Inc TSLA opened lower on Monday but was attempting to bounce up from its low-of-day after testing and holding a support level near $255.

The stock has shown weakness compared to the general market since it printed its second-quarter earnings, despite reporting numbers that beat expectations.

The EV-giant is gearing up to start deliveries of its highly-anticipated Cybertruck, as demand for its competitor, the Ford F-150 Lightning, is robust, according to a report.

As the start date for deliveries approaches, the stock might rally leading up to the event. However, at present, Tesla has reversed its upward trend, and in the coming days, it could potentially establish a new downward trend.

A downtrend occurs when a stock consistently makes a series of lower lows and lower highs on the chart.

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.

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The Tesla Chart: Tesla negated its uptrend on Thursday, when it fell to form a lower low, which was under the high low of $265.10, printing on July 10. On Monday, Tesla was looking to print a doji candlestick, which could indicate a bounce is on the horizon for Tuesday.

• If Tesla bounces on Tuesday, bearish traders will want the stock to eventually form a lower high under $299.29, which would confirm a new downtrend. Bears can watch for Tesla to print a bearish reversal candlestick, such as another doji or a shooting star candlestick, to indicate the local top has occurred and another retracement lower is on the horizon.
• If Tesla confirms a new downtrend and drags the market lower, volatility in the stock market could increase. 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.
• Bulls want to see big bullish volume come in and push Tesla up into the gap that exists between $280.93 and $289.52. Although the upper range of the gap may act as resistance if the empty trading range is filled, bullish traders could potentially drive the stock beyond this area with higher-than-average trading volume.
• Tesla has resistance above at $271.71 and at $285.83 and support below at $254.98 and at $234.35.

Read Next: Why Tesla's Cybertruck Can Become A $30 Billion Business Overnight, According To One Tech Chronicler

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