Shares of Tesla Inc. are taking a big hit Wednesday after a Battery Day that investors deemed disappointing, and have suffered bear-market-like losses this month, but sellers beware, because this year’s uptrend still lives, an Oppenheimer analyst says.
The electric vehicle industry leader’s stock
sank 10% in afternoon trading, and now sits about 24% below its Aug. 31 record close of $498.32. Meanwhile, the stock was still up nearly fourfold — up 357% — so far this year.
“Notable about the recent gyrations in [Tesla] is that the stock is still above its 50-day [moving] average, meaning weakness has been in proportion to year-do-date strength — i.e., the stock’s uptrend is intact, in our view,” wrote Ari Wald, technical analyst at Oppenheimer.
The 50-day moving average (50-DMA), which many chart watchers use to track the short- and intermediate-term trends, currently extends to about $362.56, according to FactSet. The 50-DMA has been rising everyday since May 7, although the pace of the daily increase has slowed to $1.63 on Wednesday, from $2.50 on Tuesday and $2.81 on Monday. Read more about the 50-DMA, the level and the slope.
The 50-DMA has provided support for the stock since it last closed below it on April 9.
When the stock was plunging in early September after being snubbed by the S&P 500 index
committee, highlighted by the record one-day plunge on Sept. 8, the stock bottomed out at an intraday low of $329.88, and closing low of $330.21, but stayed above the 50-DMA at the time at $329.63.
Wald expects the 50-DMA to continue as support for the stock. He said the stock, which is rated buy by Oppenheimer’s fundamental analyst Colin Rusch, has a technical rating of “MO quintile = 1,” which generally indicates an established uptrend “that should be bought on weakness.”
Another downside level to watch would be the Sept. 8 close of $330.21. A close below that level, before the stock can close above its Sept. 15 rebound high of $449.76, would confirm a bearish “double-top” technical reversal pattern, as well as launch a pattern of lower highs and lower lows, which many believe defines a downtrend. Read more about how the Dow Theory defines a downtrend.
But in the meantime, as long as the stock holds above a rising 50-DMA, as well as its previous closing low, the chart’s outlook is still on the bullish side.
“Overall, aside from additional time to consolidate over the near term, our work indicates the stock should resume higher over the long term,” Wald wrote.