Tesla's Bull Trap A False Breakout and the Battle Ahead

Tesla's stock delivered a textbook bull trap, leaving traders on edge. After testing a strong resistance level at $423.71, the stock sharply reversed, pulling back to $413.82 before ultimately closing at $396.20. This kind of price action can confuse both bulls and bears, as it gives the appearance of a breakout without follow-through.

The session started with an opening at $414.44, and bearish momentum followed. The bounce off $396.20 during the day likely lured in short sellers expecting a continuation downward. However, the stock wicked up to $423.71, briefly testing resistance, which likely forced many bears to cover their positions. This led to a spike in volatility, only for Tesla to retrace to close back at $396.20, setting the stage for the real battle ahead.

This setup could be classified as a bull trap because it gives the illusion of a potential rally or stabilization, only to leave both bulls and bears trapped. Moving forward, the key resistance remains $423.71, with $396.20 acting as immediate support. If Tesla breaches $396.20 decisively, it could trigger another leg down to the range of $375.56 to $359.42. On the flip side, a sustained move above $413.82 could bring $423.71 back into play.