Tesla stock continues to pull back from channel’s upper boundary

In recent weeks, Tesla (TSLA) shares have formed an ascending channel, within which the price regularly bounces off the lower and upper boundaries. In late August, the stock approached the upper limit and pulled back from it once again. This corrective movement intensified last Friday, but the price remained rather far from the channel’s lower limit and the critical level of $320. Therefore, traders have enough opportunities to lock in profits. This threshold is unlikely to be broken through, even though it is not unreachable.

The technical setup favors continuation of the current trend. The Stochastic lines have crossed in the overbought zone, reversing downward, while the RSI indicator has only started to move in this direction, leaving room for a further decline. At the same time, holders of short positions should take at least part of their profits at $320. The lower limit of the channel, along with the 100-day moving average, could pose a significant challenge for the bears.

Yesterday, the US stock market was not active due to Labor Day. Therefore, investors have not yet had a chance to react to Tesla’s August sales data, published on Monday. The company’s report highlighted its problems in the European market. Corporate sales in France fell by more than 47% year-on-year. The situation in the Netherlands and Sweden is even worse, with drops of 50% and 84%, respectively.

However, Tesla’s sales grew in some countries, but it was not enough to overcome competitors, such as Chinese BYD. For instance, in Norway, the former recorded an increase of 21.3% over the past month, while the latter boosted by 218%. Spain is a more vivid example, with Tesla’s 11.6% growth against BYD’s 675%. According to Bloomberg analysts, next week's Munich Motor Show will reveal the mounting dominance of Chinese companies over Tesla.

Consider the following trading strategy:

Sell TSLA at the current price. Take profit: $320. Stop loss: $350.