Tesla Share Price Forecast: A Reversal Imminent After Sharp Drop

Summary:
• Tesla share price has much at play, with investors having to juggle mixed signals. But I expect them to stay bullish in the near-term.

Tesla share price returned to the upside in Friday’s pre-market session, edging up by 1.23 percent to recover part of the losses incurred on Thursday. The stock declined by 3.3 percent on Thursday, extending a decline that had earlier been precipitated by soft sales figures in the third quarter.

What’s at play for Tesla?

Thursday’s decline was a reaction to news of another recall for its Cybertucks and a decision to exit the Model 3 from the US market. Tesla announced that it was recalling 27,185 Cybertrucks to fix a glitch in their rearview cameras. The glitch reportedly caused the cameras to delay the display of images for up to eight seconds, exceeding the legally stipulated limit of two seconds, and posing a safety risk as a result.

The Cybertruck is considered Tesla’s statement of innovation, but delayed launch and multiple recalls have dented its market takeoff. Meanwhile, Tesla (NASDAQ: TSLA) has discontinued sales of its Model 3 in the United States. The company has already removed the model from its US order page, which means that customers in the US won’t have access to Tesla’s cheapest vehicle model.

However, the move is seen as strategic, as Tesla previously indicated that its target product for the US market was the Model Y, which costs about $44,990. In addition the imposition of 25 percent tariff on batteries manufactured in China has made it uneconomical to continue with the Model 3 Standard Range model.

In addition, the Model 3 does not qualify for the US Federal EV tax rebate, making it less sensible to keep it in a market where Tesla recently introduced the Model 3 Long Range vehicle that uses batteries manufactured in the United States and qualifies for a $7,500 Federal Tax rebate. While the decision on the Model 3 is strategic, Tesla share price could come under pressure from renewed concerns over component sourcing.

Nonetheless, I expect Tesla share price to return to the upside on fuel provided by the focus on next week’s robotaxi reveal. Beyond the AI-centric vehicle’s functionality, investors will also be waiting to hear of additional milestones achieved in obtaining regulatory approvals in the EU and China. A cutting-edge robotaxi and regulatory breakthrough could potentially put Tesla share price on course to a rally.

Tesla share price forecast

Tesla stock price will likely ascend if the bulls manage to keep the price above $240.40. If that happens, the uptrend could take the stock to $244.95 where the first resistance is likely to come. A stronger upward momentum could break above that barrier to test $250.00

On the downside, the sellers could take control if the price breaks below $240.40. In that case, the first support could come at $236.16. However, extended bearishness could breath that mark and clear the way to test $232.80. Meanwhile, the upside narrative would be invalidated by the breach of the first support.