Tesla's stuck in a bear market ahead of earnings. These are the levels to watch out for

Tesla shares remain firmly in a bear market ahead of its earnings report. As investors brace for whatever wild swings will come from the release, one strategist identified key levels to watch.

"On a technical basis, you're going to want to watch the $250 level," Matt Maley, equity strategist at Miller Tabak, told CNBC's "Trading Nation" on Tuesday. "That was the low we saw in early 2017 and the low we saw just last month. If we break below that level, that's going to be a big problem."

Tesla fell below those levels in early April for the first time since trading around the $250 mark in March 2017. Both times, $250 acted as a bottom to its sell-offs. Its shares currently trade nearly 17 percent above that level.

"On the upside we also have to be careful [of] the $300 level. When the stock broke out to the upside in 2017 every time it pulled back that $300 level provided nice support, it dipped a little below that last week and it's starting to hold it again," said Maley.

Tesla shares currently hover around the $300 mark. Its stock cupped that price through the first half of April, broke below it, and recovered it again this week.

"The reason why I mention it is it's the highest short interest it's ever had so you could get a short-covering rally. Be careful of that over the short term," said Maley.

Tesla has short interest at 30.4 percent of its float.

"There's been a lot of negative news about the stock or at least chatter about the stock in terms of cash burn," said Maley. "The only way they've been able to come anywhere near close to meeting their production numbers has been to add all this cost, add all this hiring, add all these people, they doubled their workforce last year so there are some problems."

The electric car maker has operated with a negative net operating cash flow since 2013 and has not made a quarterly profit since its third quarter of 2016. It held more than $11 billion in long-term debt on its balance sheet by the end of 2017.

Its high level of short interest combined with the bad news surrounding its financials gives the stock a chance to bounce, according to Gina Sanchez, CEO of Chantico Global.

"That short interest point is really what gives the stock the skew on this to the upside," Sanchez told "Trading Nation" on Tuesday. "I think a lot of that negative news is priced in – you have competition, you have high debt levels and you have rising costs. None of those are good."

All that is already known to investors, though, contends Sanchez. The key to a post-earnings rally, then, lies in numbers outside of its balance sheet, she added.

"They have to hit their production numbers. If you see them hit their production numbers, you will get a short interest covering rally but if they disappoint it's already priced in," she said.

Tesla produced more than 34,000 vehicles in its first quarter, according to an early April update. It totaled 29,980 deliveries over the three months to March.

Tesla is scheduled to report first-quarter earnings after the bell Wednesday.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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