Tesla’s down 25% from its high, and charts point to more pain

Tesla's taken investors on a wild ride this year, and one technician warns the stock could be gearing up for even more pain when it reports earnings Wednesday after the bell.

Shares of the electric car maker are down 5 percent this year after boasting a near 46 percent gain in 2017. Carter Worth, head of technical analysis at Cornerstone Macro, believes range bound trading in the stock is signaling an even bigger breakdown ahead.

First, Worth noted Tesla's massive run-up from double to triple digits in its first years after going public. Despite its meteoric rise, the shares have fallen into a period of consolidation.

"After breaking out we've fallen back into the range," Worth said Friday on CNBC's "Options Action", "So sometimes you get a little below the range, sometimes you get a little above. But essentially it's the range that matters."

Recently, the stock has come under pressure amid investor conflict on whether Tesla's technological advancements are enough to offset myriad auto production setbacks, and concerns regarding CEO Elon Musk's ability to stay focused on the company.

Shares of Tesla hit an all-time high of $389 in September, but have since fallen into a bear market, down 25 percent from that high.

"To my eye, we have more risk of working sort of lower into the range than we do recovering quickly and making new highs," Worth said.

He also illustrates how in the past year the stock has held a series of lows around the $300 level before finally breaking "on heavy volume" down to $252 earlier in April. He believes that while this dip proved an opportunity for some resurgence in the stock, it's not likely to give much more to the upside.

"So now you're encountering a level where you're likely to do a lot of backing and filing or hitting your head and backing away," Worth said. "So that's [a] sideways or down [move], but I think eliminating the chance that it's up."

The options market is implying a 7 percent move in either direction for shares of Tesla when it reports on Wednesday. However, Carter believes this make or break moment will end in the red for the stock.

"Here's our level from which we broke, but the key is a big moment coming if you think it's [going] up it's a fair bet." he said. "My guess is that it's down or sideways, so [I'm] negative on the stock."

Shares of Tesla were trading higher around $295 on Monday afternoon.

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  • Melissa Lee

    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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