Bears In Control Ahead of Tesla Report

Tesla Inc. (TSLA) reports Q2 2021 earnings after Monday’s closing bell, with analysts looking for a profit of $0.98 per-share on $11.4 billion in revenue. If met, earnings-per-share (EPS) will mark a 55% profit decline compared to the same quarter last year. The stock fell more than 4% despite beating Q1 top and bottom line estimates in April and shed another 24% into mid-May.  It’s recovered just half of that loss into July, stuck like glue to the 50-day moving average.

Bearish Long-Term Price Pattern

The stock is taking a multi-month breather after posting an historic 839% return in 2021, closing out last Friday’s session with an 8% year-to-date loss. More importantly, price action has been carving the outline of a bearish descending triangle since November, with the pattern’s characteristic horizontal floor near 540 and lower highs at 781 and 698. Support has now aligned with the 200-day moving average, raising the stakes heading into this week’s confessional.

Fortunately for shareholders, there are good reasons to believe that Tesla will post another strong quarter. An industry publication just reported that “some U.S. deliveries of Model 3 cars were pushed back amid high demand”. Those vehicles are now manufactured at the Freemont facility but the Austin facility is scheduled to come online in coming months, supporting much higher production. Reuters also chimed in with a bullish piece, noting Q2 registrations in California increased 85% in the second quarter.

Wall Street and Technical Outlook

Wall Street consensus has grown cautious after historic share gains, with a ‘Hold’ rating based upon 15 ‘Buy’, 1 ‘Overweight’, 15 ‘Hold’, and 2 ‘Underweight’ recommendations. More importantly, six analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $67 to a Street-high $1,471 while the stock closed Friday’s session about $75 below the median $718 target.

Tesla broke out above 2017 resistance in the 70s in January 2020 and bounced at new support in March. It completed another breakout in June, entering a powerful trend advance that posted an all-time high at 900.40 on Jan. 25. The bearish pattern since that time has dropped accumulation to late 2020 levels while monthly and weekly Stochastics are grinding through sell cycles. This action warns investors to reduce risk if the stock drops to support near 540 after earnings.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.