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Tesla shares could dive into 'deep pessimism' after 100% rally in three months

Investors that are long Tesla should take some profits now: Investing pro
Investors that are long Tesla should take some profits now: Investing pro

Tesla's triple-digit rally could have run into a roadblock.

Shares have fallen 4% from highs, its pullback picking up speed on Thursday after long-time bull Baird turned more cautious. The firm's analysts downgraded their rating to neutral, though they did up a price target to $525. The downgrade comes after a breakneck surge of nearly 100% in three months.

Gina Sanchez, CEO of Chantico Global, says it looks like it's time to step to the sidelines.

"Tesla investors are experts at extrapolation and I think that's exactly what happened. [CEO] Elon Musk met his 2019 guidance and they basically extrapolated out into the future forever. And so, I think taking a step back right now does make a lot of sense," Sanchez said on CNBC's "Trading Nation" on Thursday.

Shares spiked last week after the company met fourth-quarter delivery guidance. The electric car maker reported deliveries of 112,000 vehicles over the quarter, up 23% from a year earlier.

However, after such a steep stock decline, Sanchez says Tesla could fall into a familiar trap.

"This stock just has a history of running ahead of itself and then diving into deep pessimism and then running ahead of itself, and then diving into deep pessimism. So I'd say that we're in the former headed toward the latter at some point because it always seems to happen," Sanchez said.

Sanchez said she's still a bull over the long haul, though investors have to be comfortable with day-to-day churn.

"Long term for this, I actually am a believer and I think that this is an interesting and game-changing stock, but it is still really having to suffer the sort of ebb and flow of building itself up as a company. So as that happens, the stock is more likely to have ebb than flow next," Sanchez said.

Miller Tabak equity strategist Matt Maley, who correctly called last year's bottom and rebound, says history also suggests a tenuous position for Tesla's shares.

"The stock has gotten very, very overbought," Maley said during the same segment. "Look at its daily RSI chart, it got to 87 midday yesterday. The last six or seven times it got to that level over the last three years, the stock has seen a meaningful pullback."

The relative strength index, or RSI, is currently at 79. The momentum measure is considered overbought when it's above 70.

The weekly relative strength chart has shown one instance that bucks the overbought trend, though, adds Maley.

"Back in 2013 seven years ago, it also got this overbought [on a weekly basis] and kept rallying in a strong way. Its RSI got up into low-90s so you need to be careful. I don't necessarily want to short the stock here, but for those who are long, I think you should take some chips off the table with some profits," Maley said.