technical analysis TSLA

Technical analysis of TSLA

TSLA, the representative CFD based on Tesla Inc’s shares, has remained fairly static since last week as attention continues to shift back to traditional defensive shares and concern over the company’s overvaluation continues. This technical analysis of TSLA looks at the four-hour chart ahead of Tesla’s earnings report a week tomorrow.

Tesla’s price:earnings ratio was confirmed as 794 for the full year of 2020, making it among the most overvalued shares in the world by this measurement. However, TSLA’s status as a cult share and the online popularity of Elon Musk are obvious draws for new buyers, while earnings per share (EPS) have also been positive for all of the last four quarters despite expectations for negative EPS in Q1 and Q2 2020.

Back on the chart, there is no clear resistance except for the latest high around $886. Support is also unclear, but we can probably expect psychological areas like $800, $700 and especially $600 to be important if there’s a retracement.

Technical indicators on TSLA H4

 

Moving averages continue to give a strong buy signal, with all three of the 50, 100 and 200 SMAs above slower lines and below the price. The 50 and 100 SMAs have extended significantly beyond the 200. The 50 SMA is the first zone of support from moving averages around $755.

There is no longer an overbought signal from either Bollinger Bands (50, 0, 2) or the slow stochastic (15, 5, 5). The latter at about 45 is very close to neutral. As is typically the case for any CFD on an individual share, volumes displays consistently higher buying than selling.

Price action and Fibonacci

 

8 January’s gap up has yet to be followed through with gains, and might be read similarly to a hanging man, with consolidation to come in the near future instead of yet more gains. The attempt to push lower around 11 January’s close was rejected in the next session, with indecision following, suggesting that TSLA might settle into a range slightly below the latest high in the runup to earnings next week.

The daily Fibonacci fan might provide some support if there’s a relatively deep retracement from the current area. The 38.2% zone is the first in focus. Apart from this possibility, though, extension quite far beyond the top of the fan might suggest overbought, or at least excessive enthusiasm of buying over the last few weeks. For most traders except those focussing on the very short term, buying in here looks like a big risk.

Technical analysis of TSLA: summary

 

The main event in view for traders of Tesla’s shares is the company’s earnings report after hours next Wednesday (27 January). The consensus estimate for Q4 2020’s EPS is 61c against Q4 2019’s 11c, with predictions ranging between 33c and 84c.

Overall TA suggests that TSLA’s strong gains are spent for now and consolidation seems to be favourable over the next few days. A deep retracement is unlikely but focus will probably remain on areas of importance relatively near to the price such as the 50 SMA from Bands.

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