Upcoming quarterly reports raise downside risks for Tesla shares

As previously predicted, Tesla (TSLA) stock finished September’s rally by updating 2025 highs. Share prices then entered a correction, losing about half of last month’s gains. Yesterday’s trading session closed with a noticeable rebound, though Tesla remains under pressure from the downtrend that began from the level of $470. However, there are several unclosed gaps below, formed during September’s rally, with the nearest one at $395.

Technical indicators also favor a further decline in Tesla shares. The RSI continues to decrease but remains far from oversold territory. Meanwhile, the MACD has been issuing a sell signal for two weeks, pushing the price down by more than 8%. However, breaching the $395 level will not be easy due to support from the nearby 50-day moving average. This threshold also coincides with the 38.2% Fibonacci retracement, and many traders may prefer to take profits on their short positions.

Corporate reports, scheduled to be released next week, could trigger a more significant drop in Tesla stock. After the previous earnings release, the shares fell by 8% on July 24. A repetition of this scenario is highly likely. While Tesla’s electric vehicle sales improved slightly in September compared to the weak performance in spring and summer, the financial results are unlikely to be strong.

Even upgraded price targets on Tesla stock come with an acknowledgement of the company’s challenges. Yesterday, Melius Research analysts forecast the shares would rise to $520, but noted that future products such as fully self-driving technology and Optimus robots are needed to justify this prediction. Elon Musk himself no longer considers EV production as the main business line, which could put Tesla in a difficult position if it fails to succeed in other areas.

The following trading strategy may be suggested:

Sell TSLA near $410. Take profit: $395. Stop loss: $425.