Tesla, Inc. (TSLA) was in for a regular service check in early January, and we wrote, "In this "melt up kind-of stock market" TSLA could catch a bid and rally back to the $390 area but many of its technical signals are bearish. The market will eventually decide what it wants to do but right now I do not feel confident about the upside."
When I discussed the Point and Figure chart of TSLA in January I added, "the breakout level and the breakdown level may be clearer to discern than on a bar chart. TSLA is strong with a rally to $348.14 and a decline to $302.87 would embolden the bears." With TSLA trading around $271 this morning another look under the hood is a good idea.
In this daily bar chart of TSLA, below, we can see that prices have turned lower this month. TSLA has broken below the lows of November through February. Looking back to May of last year we can see that anyone who bought the stock in the past 11 months now has a loss -- not a good situation. The slope of both the 50-day moving average line and the longer 200-day average line have turned negative. A bearish dead cross of both of these math-driven indicators can be seen in December.
The daily On-Balance-Volume (OBV) line is easier to "read" and interpret than the volume histogram. The OBV line on TSLA peaked in October and has been declining irregularly since telling us that sellers of TSLA have been more aggressive. Was that when LIBOR began moving up? (I'll have to look.) The trend-following Moving Average Convergence Divergence (MACD) oscillator turned down in late January/early February and is now below the zero line for an outright sell signal.
In this weekly bar chart of TSLA, below, we can see that prices are below the now declining 40-week moving average line. The weekly OBV line shows a peak in September and another peak in February. It now looks like sellers of TSLA have been more aggressive for several months. The weekly MACD oscillator has moved below the zero line for an outright sell signal on this time frame.
In this weekly Point and Figure chart of TSLA, below, we can see what now looks like a major distribution pattern (read selling). A potential long-term down side price target of $198 is being projected. This sounds like a car wreck and if you went long TSLA at higher levels it will probably feel like it too.
Bottom line: For months TSLA was finding buying support around $300 or so. Now that TSLA is below the round number of $300 the area above $300 is likely to act as resistance. Why this reversal of roles? Longs from above $300 are likely to use rallies back to that area to sell -- essentially to try to "get even." Some support or short-covering may materialize in the $255-$240 area but I would not view that as a bottom or even an important low. Keep your powder dry.