Chart analyst Katie Stockton says short Tesla, sees a 'topping formation'

Published Wed, Oct 12 20228:52 AM EDT

Tesla is a prime target for short-selling as the stock's chart pattern peaks, said Katie Stockton, founder of Fairlead Strategies. "We actually are recommending shorting Tesla," she said on CNBC's "Worldwide Exchange." "And I have to say that because we have a short-term [chart] breakdown – it's a significant loss of relevant strength that we've seen, and of course momentum has deteriorated." Tesla fell another 2.9% Tuesday, bringing the year-to-date loss to about 46%, worse than the Nasdaq Composite's 34% decline. Stockton said it's risky to hold Tesla, and that it will probably continue to weaken. "If you take a step back and look at the long-term picture of Tesla, you'll see what looks like a topping formation, so, to us, that holds a lot of risk," she said. "Maybe not in the very, very near term, but beyond the very near term, we do think that we'll see some additional downside leadership from Tesla." By comparison, Stockton said there is value in oil and energy stocks. The electric vehicle industry has become increasingly crowded in recent years, as legacy automakers General Motors and Ford have turned away from internal combustion engine powertrains. Tesla has also faced turmoil surrounding founder Elon Musk's on-again, off-again plan to buy Twitter, pledging to use some of his Tesla holding to finance the deal, which may still end in litigation . Meanwhile, rank-and-file staffers have balked at requirements implemented last spring to return to the office, saying Tesla does not have space or enough resources for all of its staff to work in person , sources inside the company told CNBC. Musk also announced the company was shedding about 10% of its workforce in June, around the the time he expressed a "super bad feeling" about the economy. In Tesla's most recent quarter, earnings per share beat expectations while revenue came in lower than anticipated . The company, which has moved its headquarters to Austin, Texas from California, also posted lower automotive gross margins than the prior quarter and the same quarter a year ago, citing inflation and more competition for parts. Watch Stockton's full interview:

More In Pro Stock Picks

Corporate insiders were loading up this week on these stock purchases

Nick Wells