Tesla Stock Stuck Below Its 200-Day Average: Triple Top Ahead?

While Tesla (TSLA) is having itself a pretty good day here, the overall price action going back to last August suggests a stock that has extremely choppy and non-directional price action.

Couple that with a 200-day moving average that rejected price the last time it was tested, as well as stubborn declining resistance from the late December highs of last year, and you have the makings of a stock that is stuck in the mud here.

In fact, you could make the case that the price action from the last few weeks resembles that of a triple top pattern.

However, would I go short here? Not a chance. First of all, as you can see here on SharePlanner, the market has yet to exit the advancing stage it has been in since early August and for much of this year. And even a distribution stage isn’t a sure-fire signal that we are heading lower, only that the money is showing late-stage tendencies that often precede a major market decline.

It should be mentioned that TSLA, right now, is in one of the better-looking sectors. Discretionary has put together a really nice inverse head and shoulders pattern, and while it gapped above the neckline on Friday, it failed to close above it. But today, it is the exact opposite, with a strong bounce back above the neckline as well as the 50-day moving average. That could play TSLA’s favor as well, as the stock attempts to continue its push higher here.

But probably the biggest issue with trading Tesla stock right now is the fact that it reports earnings on the 21st of October. And while I’m not predicting the stock will do badly, I am admitting that the direction is unknown, and you, me, nor anyone can predict the earnings or the direction the stock will ultimately take with any level of confidence. So as a result, I avoid trading earnings, because my inability as a trader to project where a stock ultimately wants to go in response to its earnings report is too difficult to do at this time.