Despite beating analysts’ earnings and revenue expectations in late January, Tesla stock didn’t make any headway and instead has resumed this year’s slide.
In late January Tesla (TSLA) dropped to a three-month low at $792.73, despite reporting fourth quarter (Q4) full-year (FY) 2021 earnings results that beat analyst expectations.
Back then the share price bounced straight off the 55-week simple moving average (SMA), now at $795.61, as well as the $813.95 to $780.61 support area which encompasses the mid- and late January 2021 lows and the April and early October 2021 highs.
Having said that, the recovery didn’t once manage to overcome the $950 mark, even though six attempts have been made on the daily chart in the first couple of weeks of February to date.
Tesla stock is now slipping back towards the 200-day SMA at $823.80 and key support at $813.95 to $780.61 in the wake of the electric car manufacturer recalling more than 500,000 vehicles in the US, the fourth recall made public in the last few weeks.
Two of the recalls were due to Tesla violating federal motor vehicle safety standards, while the others had to do with software issues. Tesla is recalling vehicles in the US that have the Boombox feature – a software update that allows drivers to play sounds from an external speaker such as holiday jingles or a bleating goat – and is expected to fix it with a free of charge, over-the-air software update that will disable the feature in drive, neutral, and reverse modes.
The US National Highway Traffic Safety Administration said that vehicles that use Boombox when in motion may “increase the risk of collision” to which Tesla’s CEO Elon Musk tweeted that the “fun police” had forced the company to recall the vehicles.
From a technical perspective the failure to rise above the November and early January lows as well as psychological resistance in the $979 to $1000 zone means that the bears remain firmly in control.
Last Thursday’s Bearish Engulfing pattern – where the daily candlestick “engulfed” all of the previous day’s candle – triggered the current sell-off.
A drop through the 2021 to 2022 uptrend line at $827 and the $813.95 to $780.61 major support now looks probable with the August high and September low at $709.53 to $699.95 being targeted over the coming weeks and months.
In the context of possible military conflict between Russia and the Ukraine, driven by fears that a war could disrupt supply, and the ensuing spike in oil and gas prices providing yet another boost for global inflation, a far greater decline in the Tesla share price may be seen this year.
A possible longer-term downside target in such a scenario is represented by the $545.04 to $538.39 August 2020 high, March and May 2021 lows.
Minor resistance now sits between the December and early February troughs at $875.43 to $886.25. While the next higher 2022 tentative downtrend line at $922 isn’t overcome, an overall bearish bias will remain entrenched.