By Senad Karaahmetovic
Bank of America's Technical Research Strategists say Tesla (NASDAQ:TSLA) stock is on his "head and shoulders top watch," following recent price action.
"The immediate pattern is bearish below last week’s downside gap and the 2-month double top breakdown point from 257 to 266 with declining 13, 26 and 40-week MAs an overhang from 265 to 280," the strategists wrote in a client note yesterday.
The strategists note that key support for Tesla stock is the $216-206 zone. The break of this key area would suggest "deeper downside risk to chart supports at 180 and 167 along with the rising 200-week MA near 156 and the log scale pattern count in the 100 area."
Tesla stock yielded 8 consecutive daily bearish candles that saw the price hit a new 3-month low below $220 yesterday. A move below $207 would result in the lowest levels since June last year with Tesla stock trading below the 100-DMA, 200-DMA, and 100-WMA. The 200-WMA comes in at $156.20 and offers key support for Tesla shares in case a major breakdown takes place.
The strategists also pointed to bearish technical developments in American Airlines (NASDAQ:AAL) and Salesforce (NYSE:CRM) shares. For the latter, the strategists see potential for a break toward the low $110s.
On the other hand, shares of Starbucks (NASDAQ:SBUX) are on a head-and-shoulders bottom watch with a potential for a move to $104.