Tesla enters earnings with shorts piling in, technicals weakening: S3 Partners

Tesla (TSLA) heads into its second-quarter earnings report on Wednesday against one of its most bearish setups in years, with short sellers increasing their bets as the electric vehicle maker's technical indicators continue to weaken, according to analysis from S3 Partners.

S3 data showed short interest has climbed to nearly 80M shares from about 60M in March, a roughly 33% increase, while the firm's 30-day Days-to-Cover ratio has risen to 1.75 days.

“The recent increase reflects both higher short interest and softer trading volumes, leaving bearish positioning at its most crowded relative to trading liquidity since 2021,” S3 Partners said.

The technical picture has also deteriorated. Tesla is trading below both its 50-day and 200-day moving averages after failing to hold a breakout above $430. Its relative strength index has fallen to 39, indicating continued selling pressure without entering oversold territory, while the MACD remains on a bearish crossover.

S3 concluded Tesla enters earnings with bearish positioning and weakening technicals reinforcing the same narrative, adding that "the burden of proof rests with the bulls."

TSLA shares closed at $378.9 Tuesday, down nearly 16% so far this year.