Tesla Inc. Stock Faces Resistance as Bulls Struggle

Shares of Tesla Inc. faced resistance on Wednesday as bulls failed to make significant progress. The stock's downtrend, which has been controlled by bears for the past four months, remains intact. However, there are early indications that another test may happen soon, providing an opportunity for bulls to prevail.

During morning trading, Tesla's stock (TSLA, -0.93%) reached an intraday high of $252.75, marking a 2.4% increase. At this level, bulls faced off against a descending trendline that originated from the 10-month intraday high of $299.29 on July 29. This trendline connects the highs observed in mid-September and early October.

Unfortunately, bears emerged triumphant from this battle, causing bulls to retreat. As a result, the stock experienced a 1.3% slump during afternoon trading.

Based on the Dow Theory, a widely recognized market analysis principle, a trend remains intact until a definite reversal signal occurs. Breaking a trendline is typically considered the clearest sign of a reversal.

To overcome the ongoing four-month downtrend and effectively challenge bearish control, Tesla's stock will need to rise above the trendline. This line extends to approximately $251.57 throughout the remainder of the week.

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Bulls Show Momentum Amidst Downtrend

Introduction

While Tesla's stock price has faced a downward trend, there is a glimmer of hope for bullish investors. Bulls have managed to break through one of the downtrend lines, indicating that momentum is on their side.

Relative Strength Index

Chart watchers often rely on the Relative Strength Index (RSI) to assess momentum. Since mid-June, the RSI has been trending lower, even before Tesla's stock price reached its peak. However, there is recent cause for optimism as the RSI rose above the downtrend line, initiating a new uptrend. This suggests that there is a good chance the stock price will follow suit.

To explore more about the Relative Strength Index, click here.

Short-Term Downtrend

Despite the recent uptick, it's important to note that the downtrend since July is short-term in nature. Even if the stock manages to break through the trendline, it will still have to contend with a longer-term downtrend line just above it.

The longer-term downtrend line originated from the all-time intraday high of $414.50 on November 4, 2021. Currently, it extends slightly above $273.

Medium-Term Uptrend

While the short-term trend remains bearish, bulls have made significant progress on the medium-term uptrend that began in early January.

Conclusion

Tesla's stock has experienced a 5.3% decline in the past three months. However, it has seen a notable 97.6% surge year to date. In comparison, the Nasdaq-100 Index (NDX) has rallied 46.2% this year, while the S&P 500 index (SPX) has advanced 18.6%.