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Tesla share price news: the trend is positive but prices are overbought

By David Becker

What technicals forecast about the Tesla share price this month

The price action on Tesla shares moved into parabolic mode beginning in December and has continued to surge until the price action began to whipsaw. Prices began 2020 at $418 and reached a high of $969 on February 4, 2020, following better than expected financial results released in January. Tesla reported earnings of $2.14 per share on revenue of $7.4bn while it was expected for the company to earn $1.74 per share on $7.1bn in revenue.

After an announcement from TSLA that cars initially scheduled for delivery in early February will be delayed due to the outbreak of the new coronavirus, the prices started to moderate. Let’s see what the graphs suggest about the Tesla share price prediction in February.

Tesla stock analysis: technicals

The weekly chart of Tesla shows the blowoff top that was likely a capitulation from the short-squeeze. Short-sellers became indiscriminate, as they purchased shares at any level when prices pierced through $900 per share. Resistance is seen near the highs during the first week of February at $969. Support is seen near the 10-week moving average at $711.

Prices are overbought. The RSI (relative strength index) which is a momentum oscillator is printing a reading of 92, which is the highest weekly reading on the share price in more than 7-years. The trajectory of the weekly RSI is moderating which tells you that accelerating positive momentum is stalling.

The fast stochastic, which is another momentum oscillator generated a crossover sell signal in overbought territory. This reflects accelerating negative weekly momentum. The current reading on the fast stochastic is 78, which is just below the oversold trigger level of 80 which could have foreshadowed a correction. Medium-term momentum remains positive as the MACD (moving average convergence divergence) histogram prints in the black with a rising trajectory) which points to higher prices.

The daily charts of Tesla are very choppy as prices consolidate and appear to be forming a bull flag continuation pattern. This is a pause that refreshes higher. The issue is that it will be difficult to determine if an uptrend is still in place until prices take out the February highs at $969.

Short-term momentum is neutral. Both the fast stochastic and the RSI have tumbled from overbought territory and are printing in the middle of the neutral range which points to consolidation.

Tesla share price trend: take away

The trend in Tesla prices is positive, but prices are overbought. The short-squeeze is likely over, and fundamentals will drive price action. The lack of production and sales in China due to the coronavirus will likely weigh on earnings. Look for prices to continue to trade sideways, forming a new range between $711 and $969, until the weekly overbought readings moderate.

FURTHER READING: Tesla short-sellers hit as stocks surge by 20 per cent

FURTHER READING: Tesla world No 2 after share surge

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