Tesla share price meltdown

At Tricio we look at charts in order to gauge investor sentiment and behaviour. Our last blog on Tesla in July 2024 looked at falling line resistance (green line, weekly chart below – semi-log) that was under pressure with a potential big break higher building. After some see-sawing, the line broke, the share price rallied. But, sentiment has shifted and the share price has now come back to the previous breakout line.

Tesla bulls are all atwitter (hehehe…) about what Musk should and shouldn’t do next in order to revive positive sentiment for the company and it’s products. From a simple chartist point of view, the pullback below the 50-week moving average and to the previous breakout line is not a great signal. The risk is that further losses will be seen to the rising blue support line ($170 area) with big risk of a breakdown to the early 2023 low near $101 (flat blue line). A sustained break below the latter would suggest that a bigger top is unfolding, with the rising red support and purple lines key below this low.

Bulls could make the case that the return to the breakout line is a potential buying opportunity – this is a former ‘supply line’ that could turn into a ‘demand line’ after all. A sustained turn above the 50-week moving average again would give this view some technical backing, and open up the 13-week moving average and the all-time high as potential upside targets to aim for. 

The very long-term chart below (monthly with 12 and 60-month moving averages) shows that the 5-yr. moving average is under pressure just now. Mean reversion oriented fund managers will be rejoicing!

The broader market risk – especially with high flying US tech megacap names – is that a bit of a reckoning for the huge outperformance of the last 10-years (or more) is due. A look at the monthly NASDAQ 100 semi-log chart below (with 12 and 60-month moving averages) shows that the 5-yr. moving average is near the long-term rising support close to the15,000 area. Mean reversion for some, but a potentially painful pullback for most may be looming. Hopefully buyers will be stepping in on the current test of the 1-year moving average. But sustained losses below this average, if seen, may have some big implications. 

Gerry Celaya, Chief Strategist