Tesla stock is struggling to hold a key support area, leaving traders to wonder if a larger breakdown is looming.
The market is ripping higher on Monday, but Tesla (TSLA) – Get Tesla Inc. Report is down in the dumps. Shares are down about 8% on the day as the stock is badly in need of a charge.
Today’s decline comes after Tesla’s third-quarter delivery report.
Despite record results, Tesla’s production numbers were short of expectations.
The automaker delivered 343,830 vehicles last quarter, up 42.5% year over year but well below consensus expectations of 364,660 vehicles.
Today’s action also follows Tesla’s recent AI Day, where CEO Elon Musk laid out his vision for the future.
That said, the stock isn’t reacting well on Monday despite a strong day in the market. Now, support is failing as well. Let’s take another look at the charts.
Buy or Sell Tesla Stock?
Daily chart of Tesla stock.
Chart courtesy of TrendSpider.com
A week ago, we detailed the charts for Tesla stock, highlighting the $315 resistance area, the $267 to $272 support zone and the brick wall the stock faced as it was running into four of its daily moving averages.
In fact, we said it was a “rarity to have that many moving averages clumped together.”
In any regard, Tesla stock was rejected from this area, then closed below the $267 to $272 support zone on Friday. It also closed at its lowest level since July.
While a big production beat would have likely sent shares higher today — creating a binary event — the writing was on the wall that investors should be cautious with the stock.
At that time, I noted that a failure of the $267 area could usher in a test of the $250 zone. This level was stout resistance in May through July, so bulls are looking for this area to prop up the stock amid today’s fall.
The only problem? Shares are currently trading below this zone.
At the bare minimum, I want to see Tesla close above the 61.8% near $248. Ideally, bulls will see the stock hold the $250 to $252 area. If it can’t, it’s hard to be too bullish in the short term.
In that scenario, keep an eye on the $230 to $236 area. There we find the 161.8% downside extension of the recent range and the 78.6% retracement of the larger range.
There’s no need to overcomplicate it. Tesla stock broke support and is struggling to hold the second, larger layer of support. If it does, it could set up as a long. If it doesn’t, it’s a “no-touch” for now.
