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Key Takeaways
- Tesla shares jumped more than 6% on Monday to their highest level since January as optimism mounts ahead of the legacy electric vehicle maker’s highly anticipated second quarter deliveries report due Tuesday.
- The Tesla share price has formed an inverse head and shoulders, a chart pattern that indicates a potential shift from a bearish to bullish trend.
- Amid further upside, Tesla shares could test a key trendline around $232 and last year’s high at $299.29.
- The relative strength index indicates overbought conditions, increasing the possibility for a short-term pullback to the inverse head and shoulders’ neckline around $189.
Tesla (TSLA) shares jumped more than 6% on Monday to their highest level since January as optimism mounts ahead of the legacy electric vehicle maker’s highly anticipated second quarter deliveries report due Tuesday.
Below, we use technical analysis to locate key chart levels worth watching out for amid the possibility for news-related moves in Tesla’s share price.
Tesla Carves Inverse Head and Shoulders Pattern
Although Tesla shares trended lower for several months after the 50-day moving average (MA) crossed below the 200-day MA to generate an ominous death cross signal, that move has formed part of a broader inverse head and shoulders bottoming pattern.
This formation, characterized by three distinct troughs: a lower “head” between two higher “shoulders,” indicates a potential shift from a bearish to bullish trend when the price breaks above the pattern’s neckline, which it did late last month.
More recently, the EV maker’s share price accelerated on Monday to close above the 200-day MA on the highest trading volume since late April, pointing to conviction behind the buying.
Key Levels to Monitor Amid Further Upside Traction
If the stock continues its move higher, there are several key areas on the chart worth monitoring.
The first area sits around $232, a location on the chart that will likely find overhead resistance from a trendline connecting two prominent swing highs between July and December last year.
A breakout through this closely watched chart level could see the stock test last year’s high at $299.29, a region which sits just below three successive peaks that formed in August and September of 2022 around $314.
RSI Points to Short-Term Overbought Conditions
While the relative strength index (RSI) on Monday crossed into overbought territory above the 70 threshold to confirm bullish price momentum, it also raises the possibility for short-term pullbacks. If Tesla shares retrace, it’s worth keeping an eye on the $189 level, an area they would likely attract buying interest near the inverse head and shoulders’ neckline.
Tesla shares gained 6.1% Monday to finish the session at $209.86.
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