Tesla (TSLA): Canary in the coal mine
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Tesla (TSLA) is one of the most high profile stocks in the S&P 500. Charismatic CEO and founder, Elon Musk has maneuvered the stock to a prominence beyond its market cap of more than $550 billion. One of the darlings of retail trading platforms, TSLA has a following to rival Apple (AAPL). High-flying $26.6 billion ARK Innovation ETF bet big on Tesla, their largest holding, with CEO Cathy Wood punting the stock to reach $3000 by 2025).
But lately the bubble has begun to deflate, with TSLA falling from a peak of $900 to break primary support at $600. Trend index peaks below zero warn of strong selling pressure. Follow-through below $550 would confirm our target of $3001.
Tesla Inc's vehicle orders in China nearly halved in May, when compared to April....The company's monthly net orders in China dropped to about 9,800 in May from more than 18,000 in April, the report https://bit.ly/3phOPE4 said, sending shares down nearly 5% in afternoon trading. China is the electric car maker's second-biggest market after the United States and accounts for about 30% of its sales. (Reuters)
Conclusion
Tesla (TSLA) is expected to break support at $550 which would signal a primary decline and confirm our target of $300. Collapse of such a high profile stock would send tremors through the precariously over-priced market and could act as the catalyst for a major down-turn.
Notes
- The target of $300 is calculated as the high of $900 extended below support at $600.
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Colin Twiggs is director of The Patient Investor Pty Ltd, an Authorised Representative (no. 1256439) of MoneySherpa Pty Limited which holds Australian Financial Services Licence No. 451289.
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