Tesla Top-Down Technical Analysis Ahead of Q3 Earnings Release

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Comment

Tesla is the world's most valuable auto stock. It will release its Q3 earnings today, and a key focus will be on gross margins. The company has cut its prices multiple times recently to drive sales, combat a slowing economy and fight the increase in competition. Wall Street is looking for an EPS of 72c and turnover of $23.9bn, however not at the expense of much poorer margins.

On a long-term time horizon, Tesla stock is still up, but the earning are likely to have important technical ramifications for the company.

Tesla Monthly Chart (Primary Trend is Up)


1. EMAs are trend-following indicators.
2. Tesla's green 5-month EMA is above its orange 10-month EMA, which puts the EMAs into a bullish formation.
3. This suggests to us that the current Tesla primary trend is up.
4. However, the angle and separation are poor because Tesla stock has been floundering over the last four months.
5. Nevertheless, its monthly RSI is above 50, which is on the bullish side of the indicator.
6. If the RSI maintains above 50, the longer-term monthly chart is likely to be supported.
7. A catalyst is needed to inject momentum back into Tesla stock.

Tesla Weekly Chart (Coiling Pattern Shows Congestion)


1. Tesla stock has been coiling since July, resembling a symmetrical triangle (converging green trend lines).
2. Price is getting close to the apex of the pattern, suggesting that if there is not an imminent breakout or a breakdown, the congestion pattern is set to continue, possibly evolving into another pattern.
3. However, we note that Tesla's weekly candlesticks are trading above its black 30-week EMA and the EMA is turned up.
4. This suggest that there is an underlying bullish bias, until proved otherwise.
5. The RSI is on the positive side of 50 but is subdued I.e., it is maintaining very close to 50, which is a function of its price's coiling consolidation.
6. A breakout or breakdown from the pattern will be instructive.

Tesla Daily Chart (Zone Analysis)


1. We can keep track of Tesla using zones.
2. Currently Tesla is trading between its blue bands, which is neutral.
3. If it pushes into the channel between the upper blue and red bands, this will be considered bullish.
4. If it pushes into the channel between the lower blue and red bands, this will be considered bearish.
5. We note that the red Bollinger bands have started to squeeze (vertical green rectangle) as volatility dropped over the recent months.
6. Typically, a squeeze suggests that volatility is due to expand and the release of Tesla's Q3 results may be the reason.

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Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

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