Tesla, Inc (NASDAQ:TSLA) was trading over 4% higher on Tuesday, with continued momentum after a bullish day on Monday saw the stock bounce up from the 50-day simple moving average and rally 4.2%.
Cathie Wood added shares of the EV giant to two of her funds on Monday, purchasing a total of 26,700 shares across her ARK Innovation ETF (NYSE:ARKK) and the ARK Next Generation Internet ETF (ARKW). The move comes after ARK added 69,329 shares last week.
Although Wood bought the temporary dip on Monday, the longer-term trend on Tesla’s chart points lower unless the stock can reverse from its current downtrend. A downtrend occurs when a stock consistently makes a series of lower lows and lower highs on the chart.
Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.
The lower lows indicate the bears are in control while the intermittent lower highs indicate consolidation periods.
Traders can use moving averages to help identify a downtrend with descending lower timeframe moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term downtrend. Descending longer-term moving averages (such as the 200-day simple moving average) indicate a long-term downtrend.
The Tesla Chart: Tesla entered into a downtrend on Feb. 16 and has been making a consistent series of lower highs and lower lows. Tesla’s most recent lower high was formed on March 3 at $200.48 and the most recent lower low was printed at the $163.91 mark on Monday.
- On Tuesday, Tesla was attempting to break up above the eight-day exponential moving average (EMA) but finding rejection at that level. If the stock is able to break up above the eight-day, it would give bullish traders more confidence going forward.
- In order for Tesla to negate its current downtrend, the stock will either need to rise up above $201 or print a higher low above Monday’s low-of-day. If Tesla closes the trading day near its high-of-day price, the stock will print a bullish kicker candlestick, which could indicate higher prices will come again on Wednesday.
- Tesla has resistance above at $190.41 and $200.51 and support below at $177.59 and $166.71.
Next: Stocks Volatile As CPI Inflation Meets Expectations, Attention Shifts To The Fed’s Next Move
