Tesla Inc. (TSLA) was reviewed last week. At that time we stated, "From my casual review of media reports, it seems like a number of former Tesla supporters have changed their tune. Ron Baron may still be a believer, but this humble technical analyst sees the risk of much-lower prices ahead." TSLA is once again the Stock of the Day at Real Money as investors try to price in the impact of a potential ban by China on the export of rare earth elements. Let's check on the charts again.
In this updated daily bar chart of TSLA, below, we can see that prices have worked still lower on heavy turnover (volume). The daily On-Balance-Volume (OBV) line continues to weaken and tells us that sellers are acting more aggressively. The 12-day price momentum study in the lower panel shows weaker momentum readings and thus no bullish divergences.
In this weekly bar chart of TSLA, below, we can see that prices are about halfway through the $195-$180 support area from late 2016. The farther back on a chart you look for support (or resistance), the less likely it is still meaningful as traders and investors have had plenty of time to adjust their positions. It is possible if you bought TSLA around $180 that you have taken profits when you doubled your money. TSLA is still below its declining 40-week moving average line. The weekly OBV line is still pointed down and volume is heavy. The 12-week price momentum study shows lower and lower momentum readings and no slowing in the decline.
In this long-term Point and Figure chart of TSLA, below, we can see a potential downside price target of around $42.
Bottom line strategy: A downside price target of $42 on TSLA is a lot to take in. Maybe too hard to believe among loyal investors and customers, but after living through the 1973-74 bear market I have learned to never rule out bearish targets just because...