Trade Update: Tesla Stock Chart Shows Potential 10% Decline

Shares of Tesla Motors (TSLA) - Get Report last week hit my price target range of $200 to $210, delivering 12% gains and affirming my short thesis from two weeks ago, when the stock traded at $232.

Where's the stock heading next? The chart suggests the next level of support is $186, or 10% lower.

Last Thursday, Tesla stock reached an intraday low of $203.66. Tesla shares closed Friday at $207.61. The shares are down 13.5% so far on the year, compared with a 0.13% rise in the S&P 500 (SPX) index. Just in the past 30 days, the shares have fallen almost 18%. Tesla's aggressive goals have a lot to do with this move.

CEO Elon Musk has proven he can compete with any other carmaker when it comes to producing sleek, high-tech, desirable automotive design. But now he wants to prove he can do so in high volume. Musk insists he can produce 500,000 cars in 2018, which would be two years ahead of his prior forecast. That's going to cost money.

With a net debt positions of $2 billion and negative $642 million in operating cash flow, Tesla might have to dilute current shareholders to raise more cash or go to the debt market and borrow money.

Technically, either scenario may pressure the stock, which now trades below its three key moving averages. Take a look at the chart below, courtesy of TradingView.

Since Tesla stock topped out at $267.74 on April 6, the shares have been in reverse, falling some 22%. Based on Friday's closing price, Tesla stock is now almost 3% below its 100-day moving average at $213.37. The shares, which have fallen 27.5% below their 52-week high of $286.65, are now in bearish territory, more than 20% below the 52-week high.

Tesla stock will need to trade above $210 this week and maintain that level to have any shot at resuming 100-day support. But with no near-term catalysts, a decline to $200 is just as likely.

The pressure is now on Tesla to produce vehicles in high volume, and to do so profitably. Its weak cash position means that any news about dilution will punish the shares. Until then, $186, or 10% lower, is the new key level.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.