Tesla setting up for a counter-trend rally, according to the charts

Published Mon, Jun 24 20241:15 PM EDT

Will Tamplin, Fairlead Strategies

Since there are signs of short-term upside exhaustion in market leaders like Nvidia, we look to former laggards as a source for new long ideas. Tesla (TSLA) has been one of the worst performers in the S & P 500 year-to-date, with a return of approximately negative 25%. However, our technical indicators suggest a bigger counter-trend rally could be in store for TSLA in the weeks ahead. TSLA is in a cyclical downtrend with price below declining trend-following gauges like the 200-day moving averages and the weekly cloud model. However, it appears to have found its footing after a hard test of support from the April 2023 low, near $152. TSLA has been able to clear short-term resistance levels like the 50-day moving average and daily cloud model and has seen intermediate-term momentum improve notably per the weekly MACD. This is supportive of upside follow-through within the context of the cyclical downtrend, especially since the weekly stochastics have not yet reached overbought territory. The daily MACD has also recently shifted positive after having been neutral, which suggests that TSLA is emerging higher from its recent consolidation phase. Initial resistance for TSLA is defined by a gap from January, which roughly aligns with the 200-day MA and weekly cloud model near $207. Initial support is defined by the daily cloud model, near $169, below which the bullish counter-trend setup would be invalidated. Given the bullish posture of our intermediate-term gauges, we would not rule out a move towards long-term resistance, which is defined by a trendline going back to late 2021. The trendline is near $220, and the weekly cloud moves to roughly $225 by mid-July, which creates a long-term resistance zone. 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