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Tesla Loses Charge, Negates Former Pattern: Why A Downturn Could Be Positive Going Forward

Tesla, Inc (NASDAQ: TSLA) was trading slightly lower Monday on far-below-average volume, in slight contrast to the S&P 500

Tesla, Inc (NASDAQ: TSLA) was trading slightly lower Monday on far-below-average volume, in slight contrast to the S&P 500.

The stock market index rose, but on lower-than-average volume ahead of consumer price index data, which is set to print on Wednesday.

A Tesla Model Y charging at an EV station. Tesla traded far below than average in price on Monday. (HORST GALUSCHKA/picture alliance via GETTY IMAGES)

The EV-giant will be one of the first big-tech stocks to print earnings this season, and will help to set the tone of what traders can expect as the season heats up into the end of July and early August.

Ahead of that event, Mizuho analyst Vijay Rakesh maintained a Buy rating and raised the price target from $230 to $300. Jefferies analyst Philippe Houchois maintained a Hold rating and bumped up the price target from $185 to $265.

The recent downturn in Tesla has the stock trading in a bull flag pattern, although continued momentum lower will cause the formation to negate.


The bull flag pattern is created with a sharp rise higher forming the pole, which is then followed by a consolidation pattern that brings the stock lower between a channel with parallel lines or into a tightening triangle pattern.

For bearish traders, the “trend is your friend” (until it’s not) and the stock may continue downwards within the following channel for a short period of time. Aggressive traders may decide to short the stock at the upper trendline and exit the trade at the lower trendline.

Tesla’s possible bull flag was formed between June 27 and Friday, with the pole printed between that date and July 3 and the flag forming since. On Monday, Tesla was dropping under the eight-day exponential moving average and if the stock closes under that area, the flag will be negated and the downtrend that developed within the flag may continue to draw Tesla lower.

The downtrend within the flag was confirmed on Friday, when Tesla printed a lower high at $280.78. On Monday, Tesla was forming a lower low under the most recent low of $272.88, which was formed on Thursday.

Tesla is also trading in a lower gap, which was created on July 3, when the stock gapped higher to start the trading day. Although the bull flag may be negated, closing the gap is a good sign for bullish traders and the bottom range of the gap may act as support for a bounce.

Tesla has resistance above at $271.71 and $285.83 and support below at $254.98 and $234.35.

In the coming month, Tesla will have the Cybertruck in production, which is considered to be one of the most desired vehicles from the brand.

Produced in association with Benzinga

Edited by Alberto Arellano and Kyana Jeanin Rubinfeld

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