Tesla Stock Price and Forecast: TSLA drops 3% as Fed jitters put stock in reverse
- Tesla, a high beta stock, drops 3% as risk is off ahead of Fed meeting.
- TSLA shares still steady but remain rangebound waiting for a breakout, up or down.
- Tesla share price still holding near 200-day moving average.
Markets took a bit of a turn lower on Tuesday as traders adopted a risk-off tone ahead of the Fed meeting on Wednesday. Traders and investors are growing increasingly suspicious that the Fed will begin to taper its massive bond-buying, money printing program, which has been underpinning the equity market to a huge extent. The recent inflation data and in particular the Producer Price Index hitting a record high on Tuesday may have forced the Fed's hand. Tesla is a high beta stock, meaning it is more volatile than the broad market. It outperforms in bull markets (sometimes in spectacular fashion) but gives up more ground in bearish markets. This was in evidence again on Tuesday as TSLA shares dropped nearly 3%.
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Tesla stock forecast
Tesla stock remains in a relatively new uptrend channel. This is still holding with support coming soon at the bottom of the channel at $595. The short-term trend had been looking good with the 9-day moving average guiding the shares higher, but Tuesday's price action has seen Tesla stock break lower. Overall though, the shares are lacking any strong directional clues. Reduced position sizes may be in order until a strong trend or breakout is in place. Volatility has dropped in most names, bar the meme space. The VIX is at a low level of 17, making buying some options strategies cheaper to play any breakout. Buying a call or put spread depending on your view should not break the bank now and can show some nice profits if Tesla kicks off in either direction. You buy the near strike and sell the higher-priced one. This reduces the cost but does limit potential profits.
$539 remains a key support level as volume drops off alarmingly below this level, meaning any break will most likely accelerate toward the identified bear target. $635 remains key to the upside for trend continuation. Tesla stock is still holding a bullish trend as identified by the trend channel and breaking $635 will lead to a test of $667. This $667 resistance is also the point of control since 2021. The point of control is the equilibrium price, the highest volume of buying and selling equilibrium.
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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.
