Tesla's (TSLA) shares formed a large shooting star candle in Tuesday's session at a long-term resistance level and in rhythm with a 43-week cycle high point in time. The weekly chart shows the cycle high pattern that has marked significant highs for the last three years and the stochastic oscillator, which is in an overbought condition.
The shooting star candle can be seen on the daily chart and it consists of a large upper shadow or wick and a small real body opening and closing range positioned at the bottom of the overall range. It reflects a lack of trader confidence, as the stock trades near a level that has been previous multi-year resistance.
The stock made a high in April last year and then began a steady series of lower highs and lower lows before finding a floor in December at long-term support in the $180 area. A "W" bottom formed above that support and below resistance at the intersection of the $195 level and the 50-day moving average. Pattern resistance was subsequently broken and the stock continued higher taking out the eight-month downtrend line. The sharp rally that followed has returned the stock price to its 2016 high, an over 15% diversion from the 50-day average, the highest reading since the April high. Moving average convergence/divergence is in slight bearish divergence to price and the relative strength index has been in overbought territory since the beginning of the year. These indications are early signs of deterioration in momentum. Chaikin money flow crossed below its signal average at the beginning of the year and the money flow index, a volume based momentum indicator, is moving down from an overbought condition.
The technical indications and the price action at this point in time cycle suggest the stock has made an intermediate-term high and is due for a corrective period.