Tesla’s stock fought the downtrend and the downtrend won, for now

Shares of Tesla Inc. climbed enough Wednesday to evaluate a key chart level, but then pulled back as bulls failed to make any progress.

That failure means the downtrend, that has kept bears in control for the past four months, remains intact. At least for now, as there are some early signs that propose another evaluate is coming soon, and there’s a good chance bulls will pass next time.

The electric-vehicle giant’s stock
TSLA,
-1.05%

rose as much as 2.4% to an intraday high of $252.75 in morning trading. At that high, bulls battled with the falling trendline that started at the 10-month intraday high of $299.29 on July 29, and connected the highs seen in mid-September and early October.

But bears won that battle, and bulls retreated. The stock slumped in afternoon trading to close down 1%.

Tesla’s stock rises to evaluate the downtrend line, then pulls back.


FactSet, MarketWatch

According to the Dow Theory or market analysis, which has remained relevant to Wall Street traders for more than a century, a trend remains intact until there is a definite reversal signal. And the clearest sign of a reversal is the break of a trendline.

Also read: Don’t dis the Dow Theory just because it’s over a 100 years old.

Until Tesla’s stock can climb above that fourth-month downtrend line, which extends to roughly $251.57 through the end of the week, bears remain in charge.

Read: What to expect from Tesla’s Cybertruck launch.

On the bright side, however, bulls have already broken through one downtrend line that suggests they have momentum on their side.

The Relative Strength Index, which many chart watchers use to gauge momentum, has been trending lower since mid-June, even before Tesla’s stock price peaked. Earlier this month, RSI rose above the downtrend line to start a new uptrend, which suggests there’s a good chance the stock price will follow.

Read more about the Relative Strength Index.

Tesla stock’s RSI already broke through a downtrend line, so there’s a good chance price will follow.


FactSet, MarketWatch

Keep in mind that the downtrend since July is short-term in nature, so even if the stock can break through the trendline, it has to contend with a longer-term downtrend line just above it.

That line, which started at the all-time intraday high of $414.50 on Nov. 4, 2021, currently extends to just above $273.

There’s a two-year, long-term downtrend line just above the four-month, short-term downtrend line.


FactSet, MarketWatch

And while the short-term trend remains down, bulls have made plenty of progress on the medium-term uptrend that started in early January.

Don’t miss: Here’s what it will take for Tesla’s stock to be considered back in bull territory.

Tesla’s stock has shed 5.3% over the past three months, but has soared 97.6% year to date. In comparison, the Nasdaq-100 Index
NDX
has rallied 46.2% this year and the S&P 500 index
SPX
has advanced 18.6%.

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