Tesla (TSLA) dominates the U.S. market for electric vehicle sales.
But lately, its stock has slipped from prominence among the “Magnificent 7” mega-cap stocks.
As a reminder, this group includes Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA). And overall, they’ve been a big driver of the market’s rally.
The S&P 500 bottomed in October 2022 and is up 44% since then.
And members of the Mag 7 have delivered spectacular gains during that window, like Meta’s 308% return.
In contrast, TSLA is lagging badly. It’s down 21%.
Yet signs are emerging that TSLA could get back on track. Today, let’s look at what the chart is telling us about its chances for a recovery.
Can TSLA rejoin the ranks of these leading stocks?
Stuck in a Downtrend
TSLA has a reputation for delivering big gains. In the aftermath of the pandemic, TSLA soared 1,163% from the start of 2020 to the end of 2021.
But since then, it’s been stuck in a downtrend. You can see that in the chart below, which goes back to late 2021.
The S&P found a low in October 2022. But TSLA plunged below the 50-day moving average (MA, blue line), as you can see in the chart at 1.
TSLA tried to recover lost ground in 2023. Yet it peaked at 2 last July.
Since then, it has been in a downtrend marked by a series of lower highs and lower lows.
To make matters worse, the stock took another dive below the 50-day MA at the start of this year (see 3). That’s as the S&P got off to a solid start with a gain of 9% in 2024.
But one key technical indicator shows that TSLA is trying to put in a short-term bottom.
Here are some key levels that TSLA needs to clear in order to turn things around…
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Positive Energy Is Building
The relative strength index (RSI) reveals several key developments behind TSLA’s trend.
Since the downtrend that started at 2 last July, rallies in the stock price saw the RSI barely get above the 60 level.
The 60 level on the RSI can become an overbought signal during a downtrend.
But look at what has happened since late January…
The stock price has been pulling back further. But the RSI is making a series of higher lows that you can see with the dashed trendline.
That shows momentum is quietly getting stronger.
The positive divergence in the RSI is building, which could lead to a quick rally in the stock price. In that scenario, we could see TSLA cross back above the 50-day MA followed by a rally to over $200.
And if TSLA can see more than just a “dead cat bounce,” then the RSI should push above the 60 level. That could signal a new uptrend.
On the other hand, if the RSI loses momentum and the stock starts rolling over again, then we should watch how things look around the $150 level. A breakdown there could test the early 2023 low at $100.
One way or the other, the next big move in Tesla’s stock will show if it still belongs in the Mag 7 or not.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict