NEW YORK (TheStreet) -- TeslaMotors (TSLA) - Get Tesla Inc Report investors are pretty passionate about the company and put its CEO Elon Musk on the same pedestal as other visionary thinkers and doers of the past 20 years.

Musk appears on cover of the Sept. 7 issue of Forbes, which features an article entitled "Decoding Tesla's Secret Formula." It is probably not the first magazine cover his image has graced but after the near tenfold advance in TSLA in recent years, we need to reflect, examine and decode the charts.

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From this chart above we can see a big 3-wave advance from around $30 to nearly $300 per share -- a great ride! Technicians who study and try to use classic chart patterns developed in the early 1900s often talk about a head-and-shoulders top pattern. This often quoted and sometimes misquoted pattern has a number of working parts. A head-and-shoulders top pattern is a serious, long-term reversal pattern. (Students of the history of technical analysis may want to read the original work of Richard W. Schabacker, a one-time editor of Forbes.)

The first requirement of this pattern is that we need something to reverse. TSLA fits the bill going to nearly $300 from $30. If TSLA went to $90 from $30, we would be happy with the return, but it doesn't quite fit the requirement.

Second, the pattern should evolve over a number of months if not quarters. While some technical moves can end sharply, the head-and-shoulders pattern shows a progression from an uptrend, to a sideways or neutral trend, and then a decline over months.

Third, the pattern shows three attempts to move higher with the middle rally going to a new high. Fourth, this is not a shallow pattern -- pullbacks from these peaks on TSLA are on the order of $90 or more. Volume through this pattern diminishes. The heaviest volume is early 2014 when the left shoulder is formed. The rally to the new high in the spring/summer of 2014 is on less volume.

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The technician now asks the question: What is wrong here? Shouldn't volume expand with the uptrend? The third rally is on still less volume. What is going on? The early investors bought TSLA years ago when it was cheap and now that it has had a serious advance, they are slowly taking profits into strength. Almost there.

We might want to look closer at the third rally attempt this summer when TSLA did not go to a new high. Was the news bullish? Not going to a new high on what appears to be bullish news is a subtle tip-off that all the bullish news has already been discounted and investors are looking ahead to something else.

There are a few more points worth noting. Notice how TSLA has bounced a couple times off the $180 level. Draw an imaginary line through these lows and you have a "neckline." Breaking below this neckline on increased volume will complete the pattern and put most investors who paid more than $180 at a loss.

Just remember that no investing approach is 100% -- not quant techniques, not fundamentals and not technicals. No matter how compelling the picture, one still needs to use an appropriate buy or sell stop to limit losses (or take profits) when the picture changes without warning.

Separately, TheStreet Ratings team rates TESLA MOTORS INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate TESLA MOTORS INC (TSLA) a HOLD. The primary factors that have impacted our rating are mixed – some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its robust revenue growth -- not just in the most recent periods but in previous quarters as well. At the same time, however, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 7.3%. Since the same quarter one year prior, revenues rose by 24.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • TESLA MOTORS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, TESLA MOTORS INC reported poor results of -$2.36 versus -$0.71 in the prior year. This year, the market expects an improvement in earnings (-$0.78 versus -$2.36).
  • The share price of TESLA MOTORS INC has not done very well: it is down 5.30% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The gross profit margin for TESLA MOTORS INC is currently lower than what is desirable, coming in at 31.91%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -19.29% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$159.52 million or 4356.99% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: TSLA Ratings Report