Shares of Tesla are down Monday morning after breaking down from what
normally is a bullish continuation pattern. This tight consolidation
throughout the first half of September is what most technicians would
consider a bullish pennant that traditionally resolves itself in the
direction of the underlying trend. But in this case, the pattern broke
down rather than up.
Here is a daily candlestick chart of $TSLA
where you can see this break. The bulls are still in control here from
an intermediate perspective as long this resistance from February and
August turns into support. Our polarity principles teach us that former
resistance should become support:
So far this appears to be the case as shares of TSLA stopped dropping
once they hit this 264-265 level. But a break below that could be
disastrous for this popular momentum name.
I would also use this uptrend line from the May lows as a key level
for risk management. Bulls are fine as long as that 264 holds, otherwise
a test of this uptrend line is in the cards. If neither one of those
can serve as support, then a test of the 200 day moving average is
likely, which is near the 210 level.
Something else worth mentioning is that a breakdown below this former
resistance near 264 would confirm that this breakout earlier this month
was a failed move, and would suggest a fast move to the downside is
coming. So although we do have that uptrend line in the 250s, the former
resistance shaded in gray is really my key level.
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