Tesla (TSLA) Stock Price and Forecast: Extends correction from monthly top

Tesla (TSLA) stock extends correction from monthly highs, retains $1000.
Tesla (TSLA) shares had rallied after Elon Musk said he is finished selling stock.
Tesla (TSLA) tops out at our resistance trendline, with more losses to follow.

Ivan Brian FXStreet

Update: TSLA fell for the second straight day on Wednesday, extending its correction from monthly highs of $1119. The negative tone around the leading Electric Vehicle (EV) manufacturer could be associated with growing competition across the EV space. Swedish battery maker Northvolt announced Wednesday it has produced its first lithium-ion battery cell at its factory in Skelleftea, meeting its deadline to start production at the plant before the end of 2021. Northvolt, which competes with Tesla’s battery-making division. Among other news, Elon Musk offloaded more Tesla stock earlier this week, as he sold shares worth $1.02 billion shares, reaching closer to his target of selling a 10% stake in the company.

Tesla has certainly lived up to its billing as a high beta name and further demonstrated this over the festive period. Also demonstrated perhaps was the power of Elon Musk. For it was he who appears responsible for the slump in Tesla stock this December when he tweeted about selling 10% of his holding.

To backtrack, Mr. Musk proposed a Twitter poll that showed strong support for him selling 10% of his Tesla holding. True to his word, Elon Musk began selling large chunks of stock in the electric vehicle leader. According to CNBC, on December 21 Musk said in an interview with The Babylon bee that “I sold enough stock to get to around 10% plus the option exercise stuff and I tried to be extremely literal here.” The next day he clarified on Twitter that “This assumes completion of the 10b sale.”...“When the 10b preprogrammed sales complete. There are still a few tranches left, but almost done”. This was the catalyst bulls needed to reenter the stock and set in motion the current surge we have seen. Tesla stock rallied from $886 to $1119 from December 21 until yesterday. Equating to a gain of over 20% and counting.

Tesla (TSLA) chart, hourly

Tesla (TSLA) stock news

It would appear Elon Musk is not finished selling Tesla (TSLA) shares as he sold another 934,090 shares on Tuesday according to the latest SEC filings. This is just over $1 billion worth of stock. ARK Invest is also still profit-taking in the stock as they sell another $22 million on Tuesday.

Tesla (TSLA) stock forecast

Tesla shares have stagged an impressive retracement up to our top trendline. Today's price action is therefore vital but already the signs are the trend is slowing. Yesterday was the first down day in 6, even if it was only a small 0.5% loss. Tesla (TSLA) stock is pure momentum so it is important to know when this is rising and falling. The volume behind this latest 20% rally has not been particularly impressive. Usually, this would be a sign of a weakening trend but given this is the holiday period, volumes are down everywhere. First support at the intersection of the 9 and 21-day moving averages, set at $1025 today. Hold and Tesla can have another attempt at breaking the down trendline. Failure and it is back for another test of $910. $1073 is the intraday pivot.

Previous updates

Update: TSLA resumed its advance on Wednesday, up a modest 0.14% heading into Wall Street's close and hovering around $1,090 per share. Wall Street offered a better tone, with most indexes holding in the green for most of the session. The worst performer was the Nasdaq Composite, currently down 2 points. Speculative interest is so far ignoring news reporting record coronavirus contagions in the US and Europe. However, if the situation persists, it may end up with stricter restrictive measures, which in turn, will hit the economic recovery.

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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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