Next week is shaping up as a massive test for the market…
Five of the Magnificent Seven will report earnings: Apple, Microsoft, Amazon, Meta Platforms, and Tesla.
Then two oil giants’ earnings (ExxonMobil and Chevron) will finish out the week.
The initial euphoria of Trump’s election win has died down, so these companies’ earnings will play a pivotal role in the market’s direction from here.
And today, I’d like to focus on just one of those stocks… Tesla (TSLA).
When we last looked at TSLA on December 18, TSLA’s up move was going vertical. And I warned that you needed to watch for that rally blowing out.
Our caution was well-timed, as TSLA peaked and reversed that day.
After a sharp pullback, TSLA established a base and has been trying to find a direction.
So let’s see how things could play out from here…
Triangle Pattern
TSLA’s rally in the last quarter of 2024 was meteoric.
It had been stuck in the doldrums from the start of the year. Then it gapped higher off Q3 earnings.
There wasn’t anything particularly impressive in those results. Revenue was slightly lower than forecast. Adjusted earnings per share were up. And the company expected slight growth ahead.
But CEO Elon Musk claimed that 20–30% growth was possible in 2025. Shares jumped as a result…
Tesla (TSLA)
Source: e-Signal
After that initial surge, TSLA rolled over. But then it gapped higher and continued to rally after Trump’s election win.
That latter move coincided with the Relative Strength Index (RSI) bouncing off support (horizontal green line). Likewise, the 10-day Moving Average (MA, red line) accelerated above the 50-day MA (blue line).
The RSI also indicated when the surge was slowing. It sharply reversed from overbought territory (above the upper gray dashed line) at TSLA’s peak.
TSLA fell around 23% as the RSI tracked lower and the MAs started to converge.
Yet the RSI tested and held support, so TSLA found a short-term base and began grinding higher.
Now TSLA is building a “consolidating triangle pattern” (brown lines)…
Take another look:
Tesla (TSLA)
Source: e-Signal
This pattern can often precede a breakout. The trick is to identify which direction. So what should we look for going into TSLA’s earnings next week?
|
Free Trading Resources Have you checked out Larry’s free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just click here to check it out. |
Watch for a Breakout
The RSI has been meandering along support this year. What happens next will be key…
After TSLA’s quick 130% rally, the stock is vulnerable to a pullback if earnings are mediocre or disappointing.
What’s more, investors will look for further clarity about the 20–30% growth this year that Musk had proposed.
If that fails to materialize, watch out for the RSI dropping below support. That would see TSLA break through the lower side of the triangle… and likely set off a leg down.
But wait patiently for a distinctive signal on the chart before entering a trade – TSLA could surprise us.
Either way it goes, Tesla – and the rest of the Magnificent Seven stocks – should hand us plenty of tradeable swings in 2025.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict