Tesla Motors Inc: TSLA Stock in a Critical Spot

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Shares of electric vehicle manufacturer Tesla Motors Inc. (TSLA) fell nearly 6% Monday on the back of news that the company’s U.S. sales have slipped materially on a year-over-year basis. If true, this would be particularly disturbing news considering analysts’ lofty growth expectations for Tesla.

beat the bell stock investing adviceAnd from a technical perspective, Monday’s selling in TSLA stock brought it back down to a crucial support zone, which now offers traders and investors a clear focus for risk management.

Specifically, the news on Monday came from auto industry news website WardsAuto.com, which reported that Tesla sales were looking lower by 26% year-over-year through the month of September. At the same time it was reported that Tesla was installing new sales techniques such as a three-month return policy and more favorable leasing deals through U.S. Bancorp (USB).

Meanwhile, Credit Suisse was quick to point out however that the report from WardsAuto.com had this wrong because the slowdown in sales reflects the lack of supply rather than demand; in other words, Tesla can’t deliver vehicles quick enough to feed the demand.

While confusing, this type of dichotomy in news can bring about opportunity for traders.

TSLA Stock Charts

Looking at the chart of TSLA stock stretching back to early 2013, note that Tesla’s selloff over the past two months has brought it back down to the black support line and its rising 200-day simple moving average (red line). Ever since the stock took off in a nearly vertical fashion in early 2013, it has routinely mean-reverted back to its 200-day moving average after overshooting on the upside.

In other words, should TSLA stock break and hold below the 200-day, this could structurally change its chart for the medium-term. On the other hand, if TSLA stock can hold this line of support after its earnings report next week on Nov. 5, then it could be off to the races higher again for TSLA stock.

tesla motors tsla stock charts weekly
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On the daily chart, note that TSLA stock gapped lower on Oct. 10 after posting a lower high vs. its early September all-time highs. Monday’s nearly 6% selloff, which came on above-average volume, then resumed the selling trend from the Oct. 10 gap down after the stock had consolidated for a couple of weeks.

Tesla motors tsla stock daily
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Active traders can look to short TSLA stock near the $220 area for a possibility of a quick move into the $200-$210 area before next week’s earnings announcement.

However, more tactical traders would be wise to await the earning report, then depending on how the stock reacts to the aforementioned key support line, base a directional trade on that.

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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2014/10/tesla-motors-inc-tsla-stock/.

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