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Tesla, Inc. (NASDAQ:TSLA) shares are higher on Friday. Some analysts attribute the recent drop to weak EV demand. Some have reduced their estimates.
• TSLA stock is gaining positive traction. See the market dynamics here.
The selling pressure increased after Tesla broke an important support level yesterday. This is why it is today's Stock of the Day.
Support is a price level or narrow price range where there is a large number of shares to be purchased. If a stock is going lower, there isn't enough demand or buy orders to absorb all of the supply or sell orders.
Because of this, those who wish to sell are forced to do so at discounts to draw in buyers. This puts the stock into a downtrend.
This changes at a support level. There is enough or even more than enough demand to absorb all of the supply. This is why sell-offs end or pause when they reach support.
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If a stock gets below a support level, traders say the support has “broken.” As you can see on the chart, Tesla broke the $412 support level.
This is a bearish dynamic. It shows that the buyers who created the support are gone. They have either finished or canceled their orders.
With this large amount of demand taken off of the market, the stage is set for a move lower as sellers are once again forced to undercut each other.
If Tesla does keep dropping, there is a good chance the sell-off ends around $365. You can see on the chart that this level was resistance, and in markets prices that were resistance can turn into support.
Some of the people who sold their shares around $365 regretted doing so when the resistance broke and the price moved higher. A number of these disappointed traders made the decision to buy their shares back if they can eventually do so at the same price they were sold for.
This means if Tesla does reach $365, they will place buy orders. If there is a large quantity of them, it will form support. This could put a floor under the stock.
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Posted In: TSLA
