Elon Musk-led Tesla Motors, Inc. (NASDAQ: TSLA) is due to release its quarterly numbers of Feb 10, 2016. However, the stock has been trading with a bearish bias ever since the start of this year, losing 33% YTD. The stock currently trades at $162.60 but a technical evaluation of the price chart suggests that there is room for more downside.
Taking a look at the weekly Tesla Motors price chart taken from TradingView.com, one can clearly see bears piercing crucial support levels, which exposes investors to a greater downside.
For long, the stock had been treating the level of $180 as an important buying level, but this time, that support has been breached decisively. The registered a double-top near the resistance of $290, which puts the final target at $80 per share if the bearish pattern matures successfully.
If seen from another angle, stock breached the upward sloping cushion (marked in the chart above), after facing repeated selling pressure in the contracting channel.
Having breached two long-term support levels, Tesla Motors faces an increasing risk of meeting its two bearish price targets. One is the primary target of $120 while other is the final target of $80.
Fibonacci Retracements – As the bearish momentum intensified, the stock failed to sustain above the 38.2% Fibonacci retracement level of $190 and dropped to test the 50% Fibonacci retracement level of $159. The rally from late 2012 to the peak level of $291 has been considered here.
If the 50% retracement is violated, the stock may freefall to the 61.8% Fibonacci retracement of $127, which is very close to our primary target.
As the stock market generally front-runs the official announcements, it seems that Tesla Motors may disappoint in its quarterly results and may even give weak guidance. Market participants should wait for a pullback before they build fresh short positions. Keep a stop-loss near $190 and place bearish bets on rallies.
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