Tesla (TSLA) Stock Price and Forecast: Why is Tesla stock going down?

Tesla goes parabolic yet again on Monday, breaking above $1,200.
TSLA stock rises over 8% on a slow news day.
Tesla helped to drive the S&P 500 Index higher nearly singlehandedly.

Ivan Brian FXStreet

Update: Tesla is finally beginning its landing descent but whether it comes smoothly back to earth or crash lands is anyone's guess. This one is beyond analysis now and is pure momentum. The played-out will they won't they news with Hertz has helped fuel a remarkable surge that GameStop would be proud of. Recent SEC filings show selling by some Tesla directors, not suprising given the share price rise.

Tesla (TSLA) stock price, what can you say? It defies all logic – well, my logic anyway. This one is pure momentum or as the kids would say, "FOMO". Fear Of Missing Out for us older readers. Nothing wrong with pure momentum plays and following the trend. That is what behavioral economics is about after all. The weight of money behind this one is staggering though and has seen Tesla go into space without having to launch! To the moon as our AMC friends would say.

Tesla price is now over $1,200, after having only breached $1,000 last week. That is 20% in a few sessions. Elon Musk has even expressed surprise at the move, which had its genesis in Hertz (bankrupt only last year) hitching itself to the bandwagon that is Tesla, saying it was placing a huge 100,000-unit order for Teslas.

The Tesla chart below shows the acceleration of the move, which has now extended well into overbought territory on most metrics with a super high reading on the RSI. Over 40% in 11 days for a mega tech name? Beat that FAANG!

Tesla 1-hour chart

Tesla stock news

Tesla shares immediately have been the top trenders across social media and mainstream news outlets. This came after a strong set of results and deliveries. Last week the electric vehicle (EV) sector leader delivered a strong beat on EPS, coming in at $1.86 versus the $1.57 estimate. Revenue was also ahead of forecasts, coming in at $13.76 billion versus the consensus estimate of $13.63 billion.

Elon Musk appears determined to dampen down some of the recent froth in the stock price. Earlier he had said Tesla was not a demand problem and that he was surprised the Hertz news had such an impact. He has then followed this up today by saying no contract has been signed with Hertz (HTZZ) and that deal has zero effect on Tesla's economics.

Tesla stock forecast

Tesla shares' 1-year performance is now up over 200%. Hard to argue with that type of return as Tesla motors on. We cautioned yesterday against chasing the stock higher (that worked out well!), and if we were cautious yesterday we should be downright running for the hills today. Indeed Tesla is down 5% in the premarket. No one can be too surprised about that really.

$1,000 is obviously strong support and where the movement really took off from. There was huge buying last week of $1,000 calls, which expired on Friday. The RSI remains massively overbought and the MACD similarly stretched. A pullback is inevitable. Those who are long – congratulations! Use a trailing stop to book some profits. Support exists at $1,000, but breaking $950 will turn Tesla neutral in the short term in our view.

TSLA 1-day chart

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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