Potential signal:
- I bought Tesla this morning and have no qualms doing more.
- I would have a stop loss at the $265 level and be aiming for the $335 level.
Tesla is at it again, as we continue to see a lot of volatility in this market. The Tesla market is continuing to see a lot of external noise out there, as there are a lot of concerns about the formation of a new political party by Elon Musk, and of course the ongoing feud between him and Donald Trump. Ironically, all this has done over the multiple headlines has been offer plenty of opportunities to take advantage of “cheap Tesla shares.” After all, most of the headlines are nonsense, and I believe they are being heavily skewed by retail traders jumping into the options markets, which can cause chaos in and of itself as we have seen in the past with stocks such as GameStop.
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Technical Analysis
Tesla is not enough free fall. Yes, the day on Monday was brutal, losing roughly 7% right at the open, but at the end of the day, this will end up being another situation like we had seen previously, as the markets continue to overreact to every Tweet or spat between Donald Trump and Elon Musk. One of the most recent ones has been the possibility that the US government would walk away from SpaceX, in order to punish Elon Musk. The reality is that the United States government cannot, because NASA is a shell of its former self.
Ironically, the market has found itself near the support level that I’ve been watching multiple times in the past, which is right around the $280 level. We are just below the 200 Day EMA, but the one thing that we continue to see in Tesla is that eventually cooler heads prevail, and that means people are willing to step in and buy Tesla, because the longer term outlook for Tesla is extraordinarily strong. None of this has changed, and I think ultimately this is yet another “buy on the nonsense” type of opportunity. The first thing I did at the open was by a few shares, looking to drive the market toward the 50 Day EMA. It’s not until we break down below the $260 level that I would be concerned. Keep in mind that part of the problem that Tesla has at the moment is that we also have more noise coming out of the White House about tariffs, which has weighed upon the overall markets.
All things being equal, I think this is a market that is essentially going sideways for the moment, working off a lot of the drama that it has surrounded it. After these extraordinarily violent moves, you essentially need to build up some type of confidence, and that’s exactly what sideways trading accomplishes over the longer term.
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