Reality hits Tesla, Inc. (NASDAQ:TSLA)
Earlier this month, Musk sent a letter to Tesla employees announcing that the company had to cut about 7% of its full-time workforce. He noted that Tesla is on track to post a second straight quarterly profit for the fourth quarter, but that it will earn less money than in Q3. Furthermore, he expects Tesla’s earnings to continue to trend lower in the first part of 2019.
Tesla posted a surprisingly strong profit in Q3 2018. Image source: Tesla.
The underlying problem is simple. As Musk stated in his letter (via CNBC), “While we have made great progress, our products are still too expensive for most people.” He continued:
In Q3 last year, we were able to make a 4% profit. While small by most standards, I would still consider this our first meaningful profit in the 15 years since we created Tesla. However, that was in part the result of preferentially selling higher priced Model 3 variants in North America. … [S]tarting around May, we will need to deliver at least the mid-range Model 3 variant in all markets, as we need to reach more customers who can afford our vehicles. Moreover, we need to continue making progress toward lower priced variants of Model 3.
Today, the cheapest Tesla you can buy costs $44,000 before the impact of any tax credits. For the first year or so after Model 3 sales began, the cheapest available option cost $49,000. And many customers so far have opted for even pricier variants. The higher-priced models are dramatically more profitable for Tesla than a hypothetical $35,000 Model 3 would be.
As impressive as Tesla’s Q3 surge to profitability was, it isn’t necessarily sustainable unless the company can either dramatically reduce its manufacturing costs or permanently keep Model 3 average transaction prices above $50,000.
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 324.15.
The projected upper bound is: 334.26.
The projected lower bound is: 257.68.
The projected closing price is: 295.97.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white candles.
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 18.8492. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 7 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 39.74. 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 94 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 -98. This is not a topping or bottoming area. The last signal was a buy 0 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 sell 3 period(s) ago.
Rex Takasugi – TD Profile
TESLA INC closed up 5.530 at 297.040. Volume was 19% below average (neutral) and Bollinger Bands were 11% wider than normal.
Open High Low Close Volume___
294.390 298.520 289.550 297.040 7,258,078
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 319.68 336.56 314.96
Volatility: 89 75 74
Volume: 8,872,913 7,406,006 9,014,988
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 5.7% below its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. 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 4 periods.