Following last week's earnings breakout gap shares of Tesla (TSLA) have struggled mightily. Back on Oct. 27 the stock surged on the bell, reached its 200-day moving average before quickly reversing. After an early 5% gain Tesla closed slightly in the green. Since then overhead pressure has steadily increased and may soon overwhelm the stock.
Tesla began November by taking out the October lows. The stock is weak again today and is on the verge of an ugly sell off. Last week's failed breakout is taking on a much more ominous look now as investors begin to feel the pressure of new monthly lows.
In addition a close below the $192 on Friday will drop the stock back below its 40-week moving average. Tesla has not closed below the 40 week since the February lows. For investors this should be viewed as a warning sign.
In the near term Tesla bulls should keep a close eye on the June/Brexit lows. If this key support level is convincingly taken out the downside action could accelerate dramatically. It may take some time, and much lower prices, for the dust to settle after the $187.85 level gives way.
Patient Tesla investors will likely benefit from a stand-aside posture until the post-earnings shakeout runs its course. The result could be much lower entry opportunities.