Tesla Stock News and Forecast: TSLA set to fall sharply on Tuesday as EV names suffer

TSLA stock rallied over 7% on Monday as optimism returned to the sector.
Lucid earnings after the close are likely to kill that optimism.
Tesla stock is already down 1% in Tuesday's premarket trading.

Ivan Brian FXStreet

Tesla (TSLA) stock staged a sharp rally on Monday as EV stocks saw some form of short-covering after recent heavy losses. Investors were also closing positions as the Russia-Ukraine talks progressed. The risk-reward aims toward a violent upside shock in the event of any positive outcome.

However, the talks ended without any conclusion apart from an agreement for more talks. All this saw EV stocks rally sharply. Tesla closed the day up nearly 7.5%, Rivian (RIVN) closed up 6.5%, and Lucid (LCID) closed up 10% ahead of its earnings after the close. These earnings though will be one reason why the sector resumes its downward trend on Tuesday. Lucid missed on all factors. Earnings per share (EPS) was behind, revenue was behind, and most notably the company slashed 2022 production numbers only two months into the year. The stock cratered 13% in the aftermarket. This will hit other high-growth EV names such as Rivian and NIO for sure. Tesla is far more advanced but will still likely feel the contagion effects.

For more on Lucid coverage, click here.

Tesla Stock News

We take some humor from the excuse peddled by some traders yesterday that Bernstein increased its target price for Tesla. Indeed this can be viewed as a positive, but we must point out that Bernstein's new heightened price target is $450. Yes, it is a hefty increase from its previous $300 price target, but it is still some $400 below the current share price. Also, note that Bernstein maintained its underperform rating on Tesla. The firm is merely updating its model to reflect last year's price surge. Yes, it is true the surging oil price spurred by the Russia-Ukraine conflict is a boon to EV makers, but we doubt this changed much. The automotive industry has already realized the game is up for fossil fuel vehicles and is charging forward to electric power. The recent spike in oil prices cannot speed up the process anymore.

Tesla Stock Forecast

The key question is whether this is a dead cat bounce or not. Tesla stalled at the 21-day moving average. An impressive retake of the 200-day moving average sets the Moving Average Convergence Divergence (MACD) to cross back into bullish territory, but this is likely to fail. Both the Relative Strength Index (RSI) and Elders Force Index are relatively neutral. The RSI is still below 50 and so technically more bearish, while the Elders Force is barely positive.

These momentum indicators show that the rally has not gotten much strength. The market remains choppy, but the recent spike lower keeps the downtrend in control. We set a lower low on Thursday, so this bounce does not change anything. Only breaking $945 sets a higher high and technically ends the bearish trend. The risk-reward remains to the downside, but volatility remains high.

Tesla chart, daily

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Author

Ivan Brian

FXStreet

Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.

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