Tesla Inc. (TSLA) is trading at around $312 Thursday morning, down nearly 5% on the session and almost 16% from its Monday high at $371.35. I wrote about Tesla's charts last Friday, noting that I saw a weekly Japanese candlestick with a potential bearish engulfing pattern.
The stock has since given up all of its gains from late May, and this decline is playing out faster than TSLA's February/March correction. Unfortunately, the charts don't especially look good from here.
In this daily bar chart of TSLA, we can see that prices closed below the rising 50-day moving average Wednesday. There is an area of consolidation in the $330-$300 area from April/May, and the stock should test this area Thursday:
If TSLA trades much below $315 -- the halfway point of the area above -- we could go all the way through this zone. After all, the stock's daily On-Balance-Volume line (OBV) has rolled over the past month. Telsa's Moving Average Convergence Divergence oscillator (MACD) also crossed to a "take profits sell" signal last week and is making its way down to the zero line.
In this weekly bar chart of TSLA, we can see the tentative support zone in the $330-$300 area and the next support area around $285. However, the stock's weekly OBV line might have peaked, while the MACD oscillator is poised on this timeframe for a "take profits sell" signal":
This Point and Figure chart does not have the pre-market trades, but you can see the consolidation zone that is being tested and the potential downside price target of $268:
Bottom line: The bearish engulfing pattern on the weekly candlestick chart we talked about on Friday is playing out. This is a "falling knife," and TSLA lovers could get cut by it. A close much below $315 could open the way for further losses.
(This article originally appeared at 9:44 ET on Real Money, our premium site for active traders. Click here to get great columns like this from Bruce Kamich, Jim Cramer and other writers even earlier in the trading day.)