Chart Pattern Structure Indicates Additional Underperformance for the Stock

Chart pattern enthusiasts will acknowledge two key patterns in play on Tesla’s daily chart at the moment.

Longer-term, we have what is referred to as a falling wedge pattern unfolding, taken from $205.28 and $175.01; these are generally considered reversal structures that demonstrate slowing momentum to the downside. Technically speaking, however, price action could continue to work between the two converging descending lines until just north of a support level of $118.47. Whether this occurs is impossible to tell, but these types of patterns usually witness a breakout higher before reaching the apex of the pattern.

Also likely to be a talking point is the shorter-term descending triangle, taken from $160.76 and $184.25. This formation has actually completed (ruptured the lower boundary of the pattern), thus allowing traders to chalk up the pattern’s profit objective (derived from the base value and extended from the breakout point) at $136.89.

Lower Volume

Volume studies show a deceleration in volume since price began establishing the falling wedge pattern in February. Equally, we saw a deceleration in volume during the formation of the descending triangle; the breakout below this pattern also saw little upside in volume (though this is not always necessary to confirm bearish intent).

Bears at the Wheel

With pattern structure suggesting scope for further downside in this market and price recently refreshing lows not seen since April 2023, this is likely to remain a sellers’ market for the time being. The next hurdle for shorts lies at April (2023) lows of $152.37; clearance of this region could tip the scales in favour of a push to the descending triangle’s profit objective highlighted above at $136.89. Be that as it may, before price attempts to discover lower levels, a retest of the breached descending triangle pattern’s boundary (and resistance at $163.17) is a potential scenario worth pencilling in.

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