Tesla Stock Price (TSLA): Still on course for sub $500

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Tesla (Nasdaq: TSLA) shares have just not been right since reporting earnings on April 26. Earnings per share (EPS) did beat analyst expectations, but the manner of the beat and revenue did not sit well with investors. Basically, Tesla made a lot of money from Bitcoin trading and from environmental credits – not from selling vehicles.

Tesla is one of the most well-known and followed stocks and garners significant attention from both retail and institutional investors. Elon Musk is rarely out of the news, and Tesla has revolutionized the adoption of electric vehicle technology. However, investors are now wondering if Tesla has poked the bear, so to speak, and may end up being a victim of its own success. All legacy carmakers have announced plans to commit to a fully electric future. The majority of legacy auto manufacturers have targeted 2030 for this transition. 

Tesla has also struggled since entering the S&P 500 index. Call option volume had been a huge feature of Tesla’s meteoric rise. Tesla has a huge following with retail traders and despite other shiny new toys such as GameStop and AMC coming along, Tesla remains heavily followed by retail. So heavy call option buying from retail, led to continues hedging purchases by market makers which enabled a self-fulfilling loop. However, going into the big beast that is the S&P 500 completely eliminated this loop. Market makers no longer needed to hedge directly. There are now multiple other ways to hedge option delta as Tesla is correlated to the S&P. Added to this is the index futures and options trading arbitrage that goes on in huge volumes in milliseconds by algorithmic traders. If retail buys a huge chunk of Tesla call options they will put the price out of line and arbitrage traders will quickly knock it back into line by simultaneously trading Tesla against the index options or other components of the S&P. Squeezemetrics follow this data closely and it can be a complicated but useful predictive tool. 

TSLA stock price

Tesla shares closed Tuesday at $617.20, down nearly 2%. The shares have slid from $900 in late January. This corresponds with peak GameStop showing just how followed Tesla is by retail traders.

Tesla is currently in a bear trend and is exhibiting negative trends in the main indicators. The Moving Average Convergence Divergence (MACD) is crossed into bearish territory, so is the Directional Movement Index (DMI). Relative Strength Index (RSI) is trending lower with price so is the Commodity Channel Index (CCI). 

TSLA shares have broken out of the triangle formation and are targetting a return to consolidation 1 levels. This is sub $500. There is some support to be found at $595 but it is weak. If you want to try a long position better to try support at $539, the low from March 5. This was rejected quickly on the first test so it may be a potential bounce entry for long positions. Breaking this level and really there is nothing to stop the move sub $500.

I know a lot of readers will be perennial Tesla bulls so what does TSLA need to do to recapture its bullish theme? First target is the 9-day moving average at $661.72. Breaking that and this area of resistance at $667 will turn the trend bullish. I would expect the indicators MACD and DMI to confirm. If you have a bullish bias to this one and just cannot let it go then as mentioned the $539 area may be a good bounce point or the 200-day moving average at $579. Just have tight stops because a break will be very negative.

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