Market News & Analysis
Tesla: Key Levels to Watch After a White-Knuckle Week
Matt Weller, CFA, CMT February 8, 2020 4:11 AM
With a couple minutes left until the close, TSLA has spent the entire day consolidating within the roughly 5% range it carved out during the first hour of trade.
In any other week, this sentence wouldn’t be particularly noteworthy. After all, Elon Musk’s newly-profitable electronic car company has always traded more on sentiment and expectations than traditional fundamental measures, leading to its relatively volatile stock price. However, today’s price action is remarkable for a different reason: TSLA has seen a surprisingly small range today relative to this week’s incredible volatility.
As we noted earlier this week, Tesla’s surge evoked a number of astonishing statistics, but the fact that a company with a nearly $100B market capitalization nearly doubled in less than two weeks, as we saw at Tuesday’s intraday peak, may take the cake. Looking at the chart below, the bloom came off the bullish rose in the latter half of the week, with the stock falling from nearly $1,000 down to its current level in the mid-$700s:
Source: TradingView, GAIN Capital
So what’s the outlook for arguably the biggest short squeeze of all time heading into next week?
As many traders learned this week, it’s impossible to say definitively, but the recent drop does mark a change in the character of stock, which had previously not seen even a 5% peak-to-trough drawdown on a closing basis in nearly two months. For that reason alone, it’s reasonable to assume that the proverbial bullish fever has broken and that the odds favor a continued pullback toward $500-$600 in the coming week. More aggressive bears may want to consider short positions near current levels, while those who are less convinced may prefer to wait for a move below Wednesday’s low at $687 to signal that a deeper pullback is at hand.
That said, the fact that Tesla has held up relatively well over the past couple of days leaves the door open for another leg higher. On a short-term basis, bullish traders will be watching for a potential break above Thursday’s high at $795 to signal that the buyers are attempting a last gasp push higher, with the potential to retest Tuesday’s high at $968 or even break into 4-digit territory above $1,000 as the final shorts are squeezed.
One way or another, Tesla’s massive rally over the previous week (and previous months) should offer trading opportunities for nimble intraday traders – just make sure you’re not asleep at the wheel!
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.