Tesla, Inc. (NASDAQ:TSLA) Elon Musk’s dispute with the SEC is an “overhang” on the stock
Tesla CEO Elon Musk’s habit of sparring with federal securities regulators is making Wall Street nervous.
Tesla shares seesawed Tuesday, falling by as much as 2.2 percent before recovering, hours after the Securities and Exchange Commission doubled down on its allegation that Musk “blatantly violated” a settlement with the agency by discussing the company’s production forecasts on Twitter on Feb. 19. The agency has filed a request for a court to hold Musk in contempt, which Musk’s legal team called “concerning and unprecedented overreach on the part of the SEC.”
Concerns are growing that Musk’s troubles with the SEC have become a needless and cumbersome distraction for a company that already has a lot on its plate.
Tesla has just finally begun selling a long-awaited $35,000 variant of the Model 3 midsize electric sedan, a key product for the company in many investors’ eyes. Tesla also just unveiled another crucial product: a crossover utility vehicle called the Model Y, which is meant to bring Tesla into one of the most popular segments in the car market. Both vehicles were unveiled within the last month and are priced lower than the rest of its lineup to appeal to a mass market.
The company is also building a factory in Shanghai and is continuing to expand its “Gigafactory” in the U.S., both of which are massive investments.
Investors thought the battle between Musk and the agency was over, but unfortunately it appears the SEC is “doubling down on their UFC-like fight with Musk & Co.,” said Wedbush analyst Dan Ives. “The last thing the bulls want to see is the SEC and Musk back in the courts. We believe it’s caused some investors to trim positions as the worries around this situation are starting to grow on the Street.”
The electric car maker’s stock had long seemed to defy gravity, with many analysts and investors characterizing it as a “cult stock” that soared despite concerns over the company’s performance.
But Tesla shares have fallen 16 percent over the last 12 months, and 19 percent from their price at the beginning of the year.
Of course, there are several concerns on the table, including the company’s cash position, its ability to maintain profitability and demand for its Model 3 midsize sedan and newly revealed Model Y crossover.
But worries have also swirled around Musk’s behavior, including his sometimes controversial comments on social media and in interviews.
Musk settled a dispute with the SEC in September over a tweet he made in August in which said that he was considering taking Tesla private and that he had already secured the funding, which later turned out to be incorrect. Musk’s settlement with the agency requires Tesla to preapprove anything Musk says publicly about Tesla, including whatever he says on social media.
“It is therefore stunning to learn that, at the time of filing of the instant motion, Musk had not sought pre-approval for a single one of the numerous tweets about Tesla he published in the months since the Court-ordered pre-approval policy went into effect,” the SEC said in a court document filed Monday.
Musk, who tweeted Feb. 19 that he expected Tesla to produce 500,000 cars in 2019, defended the comment by saying was only discussing information he had previously revealed.
“Under no fair reading of the materiality standard did Musk’s proud and optimistic restatement of publicly disclosed information, coming after the market closed, ‘significantly alter’ the total mix of information available to investors,” said his legal team in a March 11 response to the SEC.
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 308.98.
The projected upper bound is: 296.34.
The projected lower bound is: 236.59.
The projected closing price is: 266.47.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 26 white candles and 24 black candles for a net of 2 white candles.
A doji star occurred (where a doji gaps above or below the previous candle). This often signals a reversal with confirmation occurring on the next bar.
Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.
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 8.9248. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 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 35.81. 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 130 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 -126.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 7 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 1 period(s) ago.
Rex Takasugi – TD Profile
TESLA INC closed down -2.020 at 267.470. Volume was 49% above average (neutral) and Bollinger Bands were 17% narrower than normal.
Open High Low Close Volume___
267.500 273.300 263.460 267.470 11,800,630
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 280.26 305.33 316.26
Volatility: 45 61 75
Volume: 9,430,932 8,625,504 9,411,710
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 15.4% below its 200-period moving average and is in an downward trend. Volatility is 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 19 periods.
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