Don’t Short Tesla Inc (TSLA) Stock on Friday’s Weakness

The bears betting against Tesla Inc (NASDAQ:TSLA) are gluttons for punishment, as TSLA stock just keeps beating the odds and building on its journey into record territory. Shares of this electric vehicle company have closed at a fresh all-time high six times in the past two weeks and are up roughly 70% so far in 2017.

Don't Short Tesla Inc (TSLA) Stock on Friday's Weakness
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Still, they refuse to give up. In fact, TSLA is the most heavily shorted stock in the market with a short interest totaling $10.4 billion.

As the bears rack up big losses, eventually they’ll be forced to cover their positions. The likely outcome will be a major short squeeze, leading to even higher share prices and a continuation of this parabolic rise.

By transitioning from a company that was solely focused on electric vehicles into the renewable energy space with products for homes, large corporations and battery storage, Tesla now has the ability to remain on its growth trajectory.

However, I don’t expect the debate on Wall Street to end any time soon. And as a matter of fact, it has been heating up as the shares continue to rally.

The bears believe Tesla will never meet any of its goals and that profitability is only a pipe dream. The proof is in the earnings estimates for 2018: Out of the 20 analysts that cover this stock, the most optimistic opinion predicts the company will earn $3.37 a share for the full year.

On the flip side, the most negative expectation is for a loss of $6.57 a share. That’s quite a difference, simply proving that there are two very distinct camps when it comes to Tesla. The 2018 consensus estimate is for a loss of 90 cents a share.

Bottom Line on TSLA Stock

When it comes down to it, I believe in what TSLA is trying do and would definitely consider myself a bull on the company and the stock. However, I wouldn’t be a buyer today. The recent rally has pushed the shares into short-term overbought territory, so I’m being patient and looking for a better buying opportunity on the chart. Friday’s tech rout lays the foundation for such an opportunity.

There is price support near $325 (the black line), as well as additional support at the 20-day moving average (the green line) at $330. Then there’s the 50-day moving average (the blue line) slightly lower at $315.50.

The combination of these three indicators creates a solid support area that should hold in the short term.

A pullback toward those levels — as long as they hold on a closing basis — would provide the buying opportunity I’m looking for.

Matthew McCall is founder and president of Penn Financial Group, an investment advisory firm. Matt also is Editor of FUTR Stocks and the ETF Bulletin. Earlier this year, Matt and Hilary Kramer teamed up on Breakout Stocks where Matt serves as the Co-Editor. Most recently, Matt and Hilary joined forces again. This time, they are helping individual investors make money trading ETFs. For more on their latest project, visit

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