- Tesla (TSLA) stock is testing important technical levels.
- The bulls have a decision to make soon.
- Fans of the stock must defend it here, or capitulate and buy it lower.
The stock market is befuddling even the best pro traders. Even market makers and liquidity providers are playing catch up. The dams are springing leaks and there aren’t enough fingers to plug all the holes. Meanwhile, Tesla (NASDAQ:TSLA) stock is falling precipitously into technically important, must-hold support levels.
This is happening through no specific fault of its own. Their operational results are outstanding, and their financial metrics can prove it. Tesla is suffering from two extrinsic ailments. The first is from the lingering effects of Covid-19. There is a global resource shortage that perhaps started from the 2020 lock downs. And more recently, China has renewed restrictions because of virus flareups.
The second challenge stems from noise from Tesla CEO Musk buying Twitter (NYSE:TWTR). There are concerns that Elon leveraging his TSLA stock for the financing could hurt it.
This is not to mention the sentiment rout that’s plaguing all markets: The challenges stemming from the Ukraine invasion, and the war that the Federal Reserve has waged against the U.S. economy.
TSLA Stock Is Down But Definitely Not Out
The recent market-wide correction is punishing almost all stocks. For example, Apple (NASDAQ:AAPL) lost more than 15% since its May high, ten days ago. There are exceptions like in special sectors like energy. But even those companies are starting to show cracks. Yesterday, Tesla stock traded its first tick below the Feb. 24 flash Ukraine headline low. Consider that the S&P 500 lost that mark almost two weeks ago.
This relative out-performance is encouraging for this volatile stock. This week TSLA stock is having weak moments, but it still closed above the February low. This is further proof that this is no longer a questionable company. Under the leadership of Elon Musk, Tesla has become a shark in the electric vehicle business. Overnight we learned that TSLA paused its efforts in India because it couldn’t get the terms it wanted. That shows the maturity of its team regardless of perceptions.
Hold Tesla Here or Buy It Lower
For years the experts criticized Tesla for its messy start. Little did they know that Elon Musk had what it took to rise up to the task. I must admit I too doubted him at first, but I changed my mind with new evidence. The financials are proof positive that the company is a legitimate powerhouse. Investors looking for a strong car stock to own should consider this one. It has a huge leg up on the competition especially if the EV is the future of cars. Meanwhile, it is likely to sell every one it makes, and its global expansion is just starting.
For years, the complaints were about unfair advantages from tax breaks. Those are no longer an issue, and the only advantage it has is its brilliant first mover one. Tesla is currently miles more efficient with its gross profit. It puts both Ford (NYSE:F) and General Motors (NYSE:GM) to shame. Last year, Tesla created almost $12 billion in cash from its own operations. This was just $3 billion less than the other two. Consider that they did this with one third of the sales.
Musk made TSLA stock one that belongs in most portfolios. This, however, does not mean investors should pile in all at once. Buying some now and leaving some dry powder makes total sense. The external risks we noted could still cause further damage to the equities.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.