Key Takeaways
- Tesla shares jumped Wednesday after the EV maker released its quarterly delivery numbers, rebounding from a steep decline the previous session sparked by the feud between CEO Elon Musk and President Trump.
- Tesla shares broke down from a bearish flag pattern and closed below key moving averages on Tuesday before recovering most of the move Wednesday, laying the groundwork for a potential bear trap.
- Investors should watch important support levels on Tesla’s chart around $285 and $225, while also monitoring key resistance levels near $365 and $430.
Tesla (TSLA) shares moved back into high gear on Wednesday.
The stock rose 5% to around $316 after the EV maker released data on deliveries in the second quarter, which showed a sharp decline in sales from a year ago but were largely in line with analysts’ expectations.
The gain offset a decline of about 5% on Tuesday, when a feud between CEO Elon Musk and President Donald Trump flared up again. Musk criticized the massive tax and spending bill that GOP legislators aim to approve this week, which led Trump to warn that Musk’s businesses have benefitted excessively from government subsidy.
Tesla shares rallied 23% in the second quarter, boosted by Musk’s decision to leave his role as head of the Department of Government Efficiency to spend more time at the automaker. However, the stock has lost 22% of its value since the start of the year, weighed down by declining EV sales and concerns that Musk’s political involvement has caused damage to the Tesla brand.
Below, we take a closer look at Tesla’s chart and use technical analysis to identify price levels worth watching out for.
Potential Bear Trap Emerges
Tesla shares broke down from a bearish flag pattern and closed below key moving averages on Tuesday before recovering most of the move Wednesday, laying the groundwork for a potential bear trap, a trading event that lures investors to sell upon a breach of major support before the price makes a sudden move higher.
It’s also worth pointing out that the 50-day moving average (MA) crossed above the 200-day MA earlier this week to generate a bullish golden cross, a chart pattern that signals higher prices.
Let’s identify important support and resistance levels on Tesla’s chart that investors will likely be watching.
Important Support Levels to Watch
The first support level to watch sits around $285. This area may attract buying interest near the bottom of the flag pattern that sits on a trendline connecting a range of corresponding trading activity on the chart that extends back to last November’s election-driven stock gap.
Tesla bulls’ failure to successfully defend this important technical level opens the door for a larger drop to $225. Investors could seek buy-and-hold opportunities in this location near several prominent troughs that formed on the chart between early March and late April, which also closely align with a minor peak last August.
Key Resistance Levels to Monitor
A convincing close above the key moving averages could see the shares climb toward overhead resistance around $365. The price may encounter selling pressure in this location near a series of peaks that developed on the automaker’s chart between November and May.
Finally, further buying could drive a rally in Tesla shares to $430. Investors may seek profit-taking opportunities in this region near the mid-January countertrend high and the low of a minor retracement that formed shortly after the stock hit its record high in mid-December.
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