Key Takeaways
- Stellantis shares tumbled Thursday after the Chrysler and Jeep parent reported a significant drop in U.S. sales.
- Since setting its record high in March, the stock has trended lower within a narrow descending channel, with share turnover this week registering its highest level since late October 2019 to indicate conviction behind the recent selling.
- Investors should monitor crucial downside levels on the Stellantis chart around $11.50 and $8.50, while watching key upside areas near $15 and $18.50.
Stellantis (STLA) shares tumbled Thursday after the Chrysler and Jeep parent reported a significant drop in U.S. sales, prompting concerns that the company could rein in its generous payout to investors through dividends and buybacks.
On Monday, the company slashed its full-year profit outlook, noting that it was reducing its North American inventory amid softening global industry dynamics and intensifying competition from Chinese rivals.
Following the automaker’s weaker-than-expected U.S. sales and profit warning, analysts at Barclay’s reduced their rating on the stock to “equal weight” from “overweight,” noting they see no recovery for Stellantis until at least the first half of next year. Since the start of the year, the company’s shares have fallen around 44% through Thursday’s close.
The shares fell 4% to close at $13.08 on Thursday.
Below, we take a closer look at the automaker’s weekly chart and apply technical analysis to identify important price levels worth watching.
Descending Channel Breakdown Looms
Since setting their record high in March, Stellantis shares have trended lower within a narrow descending channel, falling below the closely-watched 50- and 200-week moving averages (MAs) in the process.
Importantly, volumes have steadily increased since late July, with share turnover this week registering its highest level since late October 2019 to indicate conviction behind the recent selling.
Crucial Downside Levels to Watch
Upon a breakdown below the descending channel’s lower trendline, investors should monitor two crucial levels on the Stellantis chart.
The first sits around $11.50, a region where the shares could attract buying interest near the prominent July and October 2022 swing lows, particularly given that the relative strength index (RSI) indicator points to oversold conditions in the stock.
A failure to hold this level may see the shares revisit lower support around $8.50, a location on the chart where investors could seek lower entries near a series of comparable trading levels positioned just above the March 2020 pandemic low.
Key Upside Levels to Monitor
If Stellantis shares undergo a reversal, it’s worth watching two key overhead levels on the chart.
Firstly, an initial recovery could test the $15 level, where the price may run into resistance near last week’s pre-gap lows, an area that also aligns with multiple peaks and troughs on the chart dating back to early January 2021.
A rally above this level could see a move up to around $18.50, a chart location where investors may look to lock in profits near the 200-week MA and a multi-year trendline connecting a range of comparable price action from December 2020 to October last year.
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