Tesla stock was hammered this morning, but bulls bought the dip. Here’s how to navigate it from here.
Tesla (TSLA) – Get Tesla Inc Report looked downright putrid on Thursday morning, opening lower by more than 8% down near $700 and then bottoming at that mark.
Shares have now erased almost all those losses and for a moment, Tesla stock even turned positive on the day.
Tesla is now working on its fifth straight daily decline and at this morning’s low, the stock was down almost 25% from its five-day high. That’s a brutal wave of selling.
Obviously the decline has dealt a blow to Elon Musk’s net worth, as shares are now down about 40% from the highs.
The decline overshadows some of the positives going on with the automaker. For instance, its most recent earnings report in January was quite solid, with the decline tied to supply chain disruptions to production.
Even just yesterday, Tesla filed to increase its production capacity in Shanghai, indicating strong long-term demand.
That said, the stock still commands a market cap of nearly $800 billion, so one can see why the stock has been pressured lately. While they don’t have nearly the same market cap, other automakers like NIO (NIO) – Get NIO Inc. (China) Report, General Motors (GM) – Get General Motors Company Report and Ford (F) – Get Ford Motor Company Report have also been under pressure.
Trading Tesla Stock
Daily chart of Tesla stock.
Chart courtesy of TrendSpider.com
Last month, notice how Tesla bounced off the 200-day moving average and downward channel support (blue line).
It bounced nicely and held around $900, but ultimately there were clues that the bulls lacked momentum. Putting the bounce aside, notice how it struggled with its 10-day and 21-day moving averages and couldn’t clear $950.
On the next dip though, Tesla couldn’t hold the 200-day, as this measure clearly flipped to resistance despite Tesla stock trying to hold it as support.
With today’s move, Tesla stock opened just above the 21-month moving average and below channel support, but it was able to reclaim the latter quickly after the open.
Now though, it’s struggling with yesterday’s low. If it can reclaim this mark and/or clear today’s high in the short term, it puts $790 to $800 back in play, followed by the declining 10-day, then the 200-day moving average.
On the downside, a break of the lows and the 21-month moving average could put more selling pressure in play.
The one exception here would be a break of the low — perhaps sometime next week — that could set up a potential bullish reversal, but we’ll have to see how the price action develops first.
For now, a break of Thursday’s low may simply usher in more downside.
