Tesla Stock Is Soaring – But Researchers Are Sceptical

Tesla (TSLA) shares have spiked this week on the back of reduced tension between the U.S. and China. The rally has pushed the stock higher for six consecutive days, trimming its year-to-date loss of 45% to under 15% and moving prices above $348. Not all market watchers are, however, celebrating.

Tesla may be overextended, warns Matthew Unterman, managing director at S3 Partners. “Tesla is flashing overbought technicals,” he wrote, referring to the stock’s Relative Strength Index (RSI), which recently broke through 70. That level tends to indicate to momentum traders that a stock has moved too quickly and may be ready for a correction.

The last time Tesla’s RSI was this high was in December 2024, following President Trump’s re-election. That rally was then followed by a steep three-month decline, as investor sentiment was rattled by CEO Elon Musk’s controversial political involvement, weak sales, and tariff concerns.

Unterman also points out that Tesla has broken its upper Bollinger Band, another indication of possible overheating. This technical pattern is usually followed by profit-taking by traders, and this causes short-term corrections.

Short interest, a proxy for bearish bets, has been steady but high at 2.7% to 2.9% since March. Unterman remarks that when the short interest goes above 3%, it may lead to selling pressure.

“With several technical indicators pointing in the same direction—RSI overbought, Bollinger Band breakout, and stable but high short interest—Tesla could be at a tactical turning point,” Unterman explained. Although Tesla’s rally is indicative of renewed optimism, he warns that the setup may soon change from bullish to bearish.

Investors should proceed with caution because the technical indicators of the stock indicate that this momentum may not continue.