Has the Tesla, Inc. (NASDAQ:TSLA) recovery begun?
It sure looks like it, if you watched the stock price, hammered down below $US200, bounce back last week.
Who knows if shares will rally, but if history is a guide, the stock had fallen too far, too fast. Now the bargain-hunters have moved in, recalling prior comebacks.
Tesla isn’t a stock for the weak-minded, obviously. It’s wildly volatile, enduring huge swings over short periods of time. It also trades on any scrap of news that crosses the radar.
But over the years, the company has established some fundamentals. Right now, the biggest of these is that Tesla dominates the small but growing electric-car market. There are people out there who want EVs, and Tesla is there to sell them. The competition is unenthusiastic, so Tesla should enjoy this market advantage for a little while longer.
In fact, there are a few reasons why Tesla is poised for a recovery. Here’s a rundown:
Tesla has often rebounded in the second half of the year.
Debates around Tesla and its future have, for the past few years, centered on its stressed balance sheet, its awkward ramp-up of Model 3 production, and the erratic behaviour of CEO Elon Musk.
But back when the company was worth … about what it’s worth now, it had retreated from a high-water marker for its stock in 2014 of about $US300 and had established a routine pattern of declines in valuation at the beginning of the year, followed by recoveries as the year closed out.
Because Tesla is always in the news and because the stock is a battleground for investors, wild swings in the share price aren’t unusual. This is abnormal for the business Tesla is in – building and selling cars, where major automakers can see their shares remain flat for years – so the trick from 2014-17 was to discern a pattern that made at least some sense.
That was the only way you could figure out if Tesla was just slightly overvalued or wildly overvalued. By the same token, big sell-offs for Tesla were sometimes overcooked. The classic example was a big drop after Tesla acquired SolarCity in 2016.
Savvy investors who thought the deal wasn’t going to kill Tesla bought when shares we’re below $US200 and enjoyed a run to nearly $US400, prior to the stock’s retreat in 2018 and collapse in 2019.
Lo and behold, Tesla is once again rebounding as we prepare for the second half and for the car maker’s report on second-quarter vehicle deliveries. Tesla has been telegraphing that deliveries should be a big improvement over the first quarter, which was a big drop-off from a robust close in 2018.
That speculation has pushed shares above $US200 again, an important level of support for the stock. A decent Q2 should send the stock back toward $US250. History has taught Tesla investors that they really don’t want to miss the rallies, which tend to be dramatic.
Deliveries for Q2 should also set the stage for what could well be a return to profitability by Q3 or Q4 (Q2 is staging for a loss). The final quarter is typically Tesla’s biggest, so no surprises there.
The takeaway here is that we’ve seen this movie before. The difference is that we’re now watching it for the first time again after Tesla’s nightmarish 2018 and early 2019.
Musk has been chillin’.
Compared with 2018’s orgy of Twitter-enabled madness, Musk has more or less stuck to his knitting in 2019.
Some of this has been ironically the result of short-sellers getting the better of him. They have been winning, so they have less incentive to provoke, and that has given Musk less to react against.
Musk has also been busy with his other company, SpaceX, which recently launched a small constellation of internet satellites. Rocket science is hard – and time-consuming.
Additionally, Musk has been pushing Tesla in a heads-down, get-it-done direction, akin to how he ran the company in the second half of 2018, when it surged to a profit.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
By the way, prices are vulnerable to a correction towards 231.61.
The projected upper bound is: 225.11.
The projected lower bound is: 181.08.
The projected closing price is: 203.09.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 23 white candles and 27 black candles for a net of 4 black candles.
A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 82.4076. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 3 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 44.00. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 3 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 127.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 3 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 2 period(s) ago.
Rex Takasugi – TD Profile
TESLA INC closed down -1.450 at 204.500. Volume was 51% above average (neutral) and Bollinger Bands were 31% wider than normal.
Open High Low Close Volume___
205.000 210.844 203.499 204.500 16,003,527
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 192.22 239.43 292.24
Volatility: 62 59 71
Volume: 13,137,969 12,055,010 9,692,659
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
TESLA INC is currently 30.0% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of TSLA.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on TSLA.O and have had this outlook for the last 39 periods.
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