Tesla shares have taken a beating this year. Here's where they could find support, charts show

Published Tue, Apr 23 202412:53 PM EDT

Tesla recently made new yearly lows with no apparent support level in sight until another 30% lower at the early 2023 bottom of $101.81. Will it break that low further unwinding the hype and supercharged valuation in this stock? I'm not so sure. We're heading into Q1 earnings this evening plagued with a plethora of negative news headlines clouding this stock. The list includes price cuts on vehicles in Europe and Asia, increased cost from Cybertruck production and Cybertruck recalls, a 10% workforce reduction, the lowest delivery figures in over two years (that were below even the lowest Street estimates) and a possible sidelining of its $25,000 vehicle to focus on self-driving robotaxi platform. Tesla shareholders, me included, are coming to the realization that consumer appetite for electric vehicles combined with increased competition are significant headwinds for the stock. The possibility for outsized returns for the company that achieves autonomous driving and mass transport are very real, but like Facebook's transition to the metaverse, how far out and at what cost? All that being said, the phrase "it's always darkest before the dawn" usually applies to beaten-down fundamental stories that are approaching technical support. Before we throw in the towel on this stock, we need to take a good, hard look at the more advanced technical patterns through the lens of Elliott Wave analysis. Turning to the Tesla Weekly Chart using the Elliott Wave Principle we identify TSLA in a triangle correction pattern that consists of 5 swings of lower-highs and higher-lows labeled as green "A-B-C-D-E." The white inset chart model is included with the "you are here" in the C-wave. The anticipated support zone in this green C-wave decline is between $135-$125 from a clustering of 3 Fibonacci ratios that could possibly setup a relief rally back above the $200s. I currently hold a 2% allocation of TSLA in our growth portfolio at Inside Edge, having reduced the position from as much as 6% in the past year. We are also hedged in the near-term with a May 17th 150/135 put spread in our research business TradingAnalysis.com. I'm looking to take that position off before the close today. All eyes and ears will be on Elon and the conference call following earnings next week to hear how he plans to address this horrible sequence of events for Tesla. If CEO Elon Musk fails to comfort investors and that $125 support zone does not hold, the next obvious technical level is the 2022 low at $101.82. Again, referring to the Elliott Wave model, the outlook for a successful defense of the double bottom is not hopeful and our expectation is TSLA will then trade with a 9-handle for the first time since Aug 2020. At that time, I will probably be out of all Tesla for the first time ever. —Todd Gordon, founder of Inside Edge Capital, LLC DISCLOSURES: Todd Gordon owns TSLA personally and in his wealth management company Inside Edge Capital Management, LLC. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.