Technical Analysis – Tesla stock bullish but overbought ahead of Q3 earnings

Tesla’s stock rose exponentially last week to finally close the large gap with January’s record high of 899.98, but as the clock is ticking down to the Q3 earnings release today, traders are wondering whether the price can sail back to uncharted waters or start a new bearish cycle.

From a technical perspective, the latest upswing is looking overstretched. The RSI and the Stochastics seem to lose steam above their overbought levels, while the price's close above the Bollinger band the past two days is another warning of fading buying pressures.

Should the bears take control below the nearby 855 support area, the price may seek new shelter near the 20-day exponential moving average (EMA), which has been a key base to downside corrections in late September. Breaking that line, the sell-off may continue towards the 50-day EMA and the 760 handle. Still, as long as the stock keeps trading above the long-term ascending trendline seen at 718.00, any declines will have little impact on the broad positive outlook.

Alternatively, if the rally gets new legs above the 900 round-level, the spotlight will turn to the 950 and 1,000 psychological numbers.

In brief, Tesla’s stock has upgraded its bullish outlook in the short-term picture, though the odds for a downside reversal are currently looking solid. A negative correction could bring the 855 support zone under examination.

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