Chart Of The Day: Tesla May Be On The Way Down

After a 31.4% slump year to date and a 33.1% slide from its Nov. 4, 2021 record close, is Tesla (NASDAQ:) a bargain?

Tesla does have a lot going for it. The company showed resilience to challenges in the and has the potential for a record-breaking second half, as it remains the leader in its space. Furthermore, Constellation Research Principal Analyst & Founder, Ray Wang argues that Tesla and others should replace Meta Platforms (NASDAQ:) and Netflix (NASDAQ:) in big-tech leadership.

But according to my interpretation of the forces of supply and demand, it is not yet the time to buy Tesla, and it might even be a good idea to short the stock.

In August I outlined conflicting trends in the share price and predicted the short-term trend would continue before the long-term falling trend resumes. I was wrong. The bullish flag blew out. The tell-tale sign lacked volume support upon the flag’s breakout so the potential bullish pattern’s failure turned bearish.

The stock completed a small double top, reinforced by the 200 daily moving average (DMA). After a near 5%, 3-day penetration, presumed short-covering triggered a return move that confirmed the neckline’s resistance.

Note: I would prefer heavier volume on the breakout, and the 50 and 100 DMAs have been supporting the price for the past three sessions. Based on its $34.25 height, the pattern’s implied target is $245.10

Tesla has been ranging since December 2020. A downside breakout below its lows will complete a massive H&S top, implying a $200 downside breakout. Conversely, an upside breakout from the falling trendline since then could suggest a continued uptrend line. It is important to underscore that the range is presumed to disrupt an uptrend as long as there is no downside breakout.