2 Very Different Ways to Trade Tesla as January Earnings Approach

Key Points

• Tesla has entered the new year on the back foot, dropping more than 12% from its pre-Christmas all-time high. 
• Weakening momentum indicators are starting to clash with a still intact uptrend, leaving the stock at a critical decision point ahead of earnings later this month. 
• Investors face a clear choice between buying into a pre-earnings dip or waiting for the volatility to play out first.

Automotive giant Tesla Inc. NASDAQ: TSLA is heading into its next earnings report at the end of January with momentum suddenly working against it. After finally hitting fresh all-time highs just before Christmas, the stock has since logged its longest run of red days in months and is now down more than 12%. For a name that spent much of last year grinding higher, this has been a jarring start to 2026.

Technically, the picture has deteriorated in the short term. The stock’s MACD printed a bearish crossover last week, while its relative strength index is very much in oversold territory. That said, the longer-term uptrend remains intact. A rising support line that has been in place since before last summer is still holding, and breaking it would require a clear escalation in selling pressure that has not yet materialized.

Winds of Change Starting to Blow

While the bulls should take some solace from that, recent news won’t exactly have given them cause for celebration either. Fresh headlines on Monday highlighted that Tesla’s China factory shipments fell for a second consecutive year, while concerns are growing around a broader slowdown in global EV demand. 

Adding to the pressure, Chinese rival BYD Company Limited OTCMKTS: BYDDY was officially confirmed as the world’s largest seller of fully electric vehicles in 2025. Against that backdrop, traders are approaching earnings with far less confidence than they might have been just a few weeks ago. All of this sets up two very different ways to trade Tesla from here—let’s take a look at them. 

Option #1: Buy the Dip Ahead of Earnings

The first approach is to view the recent selloff as an opportunity rather than a warning. Tesla does not pull back like this very often after making new highs, and when it does, long-term bulls tend to pay attention. With the stock now more than 12% below its peak, you have to be thinking that much of the recent negativity is now priced in.

The stock’s valuation, long a thorn in the bull’s thesis, has adjusted accordingly. The sharp drop has pulled Tesla’s price-to-earnings (P/E) ratio down meaningfully from its recent extremes, easing one of the biggest objections bears had during the rally. For investors who believe the long-term story remains intact, this dip offers a chance to build or add to a position at a discount ahead of a significant catalyst.

Analyst support reinforces that view. Already this week, the team at New Street Research has reiterated its Buy rating on Tesla, while boosting its price target up to $600, implying close to 40% in potential upside from current levels. That kind of conviction, coming after a notable pullback rather than before it, suggests the sell side sees the weakness as temporary rather than structural.

Option #2: Wait for Confirmation After Earnings

The second approach is more cautious and requires more patience. Tesla’s recent price action has been unsettling, and the combination of bearish momentum signals and negative headlines raises the risk that this pullback is not finished yet. A stock can remain oversold longer than expected, exceptionally when sentiment starts to shift.

Waiting to see how the next few weeks go should allow the market to answer two key questions. First, will buyers defend the rising support line that has underpinned the rally since last summer? Second, can Tesla deliver an earnings report that restores confidence around demand, margins, and execution in a more competitive EV landscape?

The likelihood is that Tesla’s following earnings report will easily cause a fresh burst of volatility. A strong report would likely invalidate the recent technical weakness and restart the rally. A miss, however, or even numbers that just about met expectations, could invite further selling given how sensitive sentiment has become. For risk-averse investors, standing aside until after all those questions have been answered may be the more comfortable choice.

Why Tesla’s Next Moves Matter More Than Usual

It’s lining up to be a more critical report than usual, and it feels like the stock and the company are both at a bit of a crossroads. The long-term trend is still intact, but short-term momentum is starting to crack. 

Whether this proves to be a routine pullback or the start of a deeper correction will depend on how the stock behaves around support and how convincingly management addresses demand concerns later this month.