Tesla’s latest earnings report wasn’t pretty.
During the first quarter, Tesla’s automotive sales fell by 20%. Net income plunged by 71%, which also caused earnings per share to come in below Wall Street estimates.
CEO Elon Musk’s proximity to President Trump initially seemed like a good thing for Tesla’s stock.
But his popularity has waned due to his involvement with the Department of Government Efficiency. And Tesla shareholders have been left wondering if Musk’s involvement in Washington has been too much of a distraction.
The quarterly financials might have answered that question.
With earnings and vehicle sales slumping, the stock has taken a sharp turn lower as well.
Due to growing concerns, Musk announced he’s turning his attention back to the company.
Today, let’s check in on Tesla’s recent roller coaster ride… and see if the chart is hinting at a Musk turnaround in the works…
TSLA’s Roller Coaster Ride
Tesla had been a lagging member of the “Magnificent 7.”
From the start of 2022 through the end of 2023, Tesla shares lost ground. It was the worst performer among the Mag 7.
But then the stock made a U-turn. About a year ago, TSLA started a bullish run.
That rally saw TSLA gain 237% in just seven months. A large portion of those gains started on November 6… the day following the presidential election.
Trump’s election win helped spark a massive rally in TSLA and made Musk the first person to reach a net worth of $400 billion.
But TSLA has given back all the gains just as quickly. Take a look at the chart below:
The stock rallied to a new all-time high at “1” on December 17. It then started a multi-month pullback.
The sell-off picked up steam when the stock fell below the 50-day moving average (MA, blue line) at the arrow.
That corresponded with the Relative Strength Index crossing below 50. The RSI measures underlying price momentum. The 50 level acts as a dividing line between bullish and bearish price momentum.
TSLA shares have now fallen as much as 51% from the peak. That’s brought TSLA back to a critical chart level.
At the same time, emerging signs suggest that TSLA shares could stage a turnaround…
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A Bullish Setup?
Tesla’s stock gave back all its post-election gains. Yet the stock is now testing a support zone that’s held going back to last summer.
Take another look at the chart:
The shaded area on the chart shows the $200-$220 zone. That’s a support level where Tesla broke out from a consolidation to start its post-election rally.
At the same time, a bullish momentum divergence is appearing.
Since March 10, TSLA has tested the $220 area on four occasions. On each test, the RSI made a higher low, as shown with the dashed trendline.
That shows underlying price momentum is improving as TSLA tests this key support level.
Here’s what to watch for next…
If the rising RSI can help spark a rally, we’ll want to see TSLA cross back above its 50-day MA. An increase in the RSI back above 50 would be another bullish indicator.
But a recovery isn’t guaranteed. If TSLA gets rejected at the 50-day MA, watch for the stock to lose price support by moving below $200.
In that case, Tesla investors need to prepare for more pain ahead…
Happy Trading,
Larry Benedict
Editor, Trading With Larry Benedict
P.S. Tesla is far from the only stock feeling whiplashed by the current market action.
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