TSLA Stock: The Infuriating Bear Case for Tesla Motors Inc

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TSLA stock - TSLA Stock: The Infuriating Bear Case for Tesla Motors Inc

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Tesla Motors Inc (NASDAQ:TSLA) is continuing to scale up and reaching a certain level of self-sufficiency, so the situation with Tesla is improving. However, owning TSLA stock still is as much a psychological exercise as it is an investment in an a carmaker’s results.

Tesla TSLA stock musk image

That is, if you’re trading Tesla stock, you may already innately know that TSLA is driven more by news and sentiment than it is by the company’s fundamentals. And the tone of the rhetoric is as often a function of the stock’s current direction as the stock’s current direction is a function of the rhetoric’s tone.

In other words, a bet on TSLA stock now is a bet that the rest of the market will still be in love with the idea of a cool-looking EV at some point in the future.

It’s not rational, but it is the way it is.

With that as the backdrop, though there’s arguably never been more reason than right now to make an investment in Tesla Motors, the market has already tipped its hand to how it feels about the company’s … well, the stock’s future.

The bulls aren’t going to be happy.

The Truth Hurts

For the record, yes, yours truly here was the same guy who probably panned Tesla Motors more than cheering the company in 2013 and 2014.

It wasn’t about the company’s ability to combine form and function in an electric vehicle; there is no cooler, more marketable EV than a Tesla. It was that enough of the more vocal variety of investor put TSLA stock on a pedestal and refused to even discuss the possibility that Tesla Motors — like any other company — wasn’t completely bulletproof.

Also for the record, though, my concerns were merited. TSLA stock is currently priced right where it was in February 2014 — right at the height of the frenzy.

Reality didn’t live up to the hype.

In any case, since I’m going on record with a handful of notions here, let me also put on record that there has never been more going for Tesla Motors as a company than it has going for it right now. TSLA also has a much stronger financial foundation right now than it has ever had.

Problem is, that still doesn’t matter much in terms of the value of TSLA stock.

Trading this stock is still mostly a matter of figuring out how the market will feel about it a few weeks to a few months in the future.

Tesla Stock Charts

To that end, between the fact that TSLA stock just logged a second lower high (the first lower high was the early April peak) following a major lower low (from February of this year), there’s no other conclusion than to say the bigger trend/undertow is more bearish than bullish.

Until we see a higher high and higher low, we have no justification for thinking otherwise.

TSLA stock, weekly
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Zooming into a daily chart of the Tesla Motors shares, we can get a little more perspective on the recent bearish reversal that led to the second lower high.

The pivotal day (literally) was June 8. That’s when the budding rally effort ran out of gas even before it got a chance to get going in earnest. That day’s bar is an upside-down hammer, or gravestone doji, indicating an intraday transition from a net-buying environment to a net-selling one.

The bearish follow-through over the course of the next three days underscores this bearish thesis.

TSLA stock, daily
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TSLA shares are also currently below all their key moving average lines except the 100-day moving average (gray), which from a sheer momentum perspective is bearish.

To be fair, until TSLA breaks below the May low of $203.66, there’s always a small chance it could pull itself out of this rollover effort and escape mostly unscathed. But, the media’s been pretty rough on the company of late, suggesting the rhetoric pendulum is swinging in the same bullish direction it was swinging in January again.

Bottom Line for TSLA Stock

The good news is, like all pendulums, this one will sooner or later swing back in a bullish direction. And, sooner or later (more likely later), Tesla shares will reflect company results rather than sentiment.

We’re not quite there yet, though, and we’ve got at least one of not to more major sentiment-driven meltdowns to work through here before TSLA becomes a “normal,” corporate-results-driven stock. A break under $203.66 and subsequent slide should be the first of those major pullbacks we need to get out of the way.

A move all the way to the Fibonacci retracement line at $127 isn’t out of the question, though that would be a very compelling buy-in point if it happened.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/06/tsla-stock-tesla-motors-inc-bear-case/.

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