Tesla chart looks poised to ‘crack in a big kind of way,’ warns technical analyst

As Tesla gears up for its latest quarterly earnings this week one top technical analyst warns the stock is on the verge of a major breakdown.

Shares of the electric-auto manufacturer were under pressure on Monday afternoon, falling more than 3 percent, and now on track for its worst month since March. According to Carter Worth, head of technical analysis at Cornerstone Macro, the charts are suggesting a bumpy road ahead.

Shares of Tesla have been on a roller coaster over the past year and trading firmly in a bear market, down more than 25 percent from its 52-week high.

Tesla is "now for the first time below the trend line," Worth said Friday on CNBC's "Options Action." "I think that's the setup for what's going to be a pretty good break to the downside."

In the past two years, Tesla has managed to post gains of nearly 23 percent. However, Worth's charting shows that despite the stock breaking above its downtrend line around $340 earlier this year, its failure to maintain that level could imply a bigger sell-off to come.

"So the problem is by drawing people in and then now undercutting the line ... ultimately [Tesla's] going to now crack in a big kind of way," he explained.

The company has faced increased scrutiny as investors contemplate whether CEO Elon Musk will be able to keep up with production numbers without the need of another capital raise. Those same concerns sent Tesla shares down nearly 6 percent after hours following its earnings last quarter.

"I think if one is long Tesla, take measures however one wants to do that. And if one is a short-seller, this is a good candidate," Worth said.

Tesla is expected to report second-quarter earnings after the bell on Wednesday. The stock was trading lower on Monday afternoon, around $287.15.

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  • Melissa Lee

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

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