Tesla
stock is on one of its streaks, the kind that frustrates investors, leaving them to ask what’s going on. The short answer is not all that much. The decline probably comes down to taxes.
Tesla stock closed at $234.96, down $5.49, or 2.3%, in Tuesday trading, while the
S&P 500
dropped about 0.2% and
Nasdaq Composite
gained 0.1%.
Shares of the electric-vehicle maker are down for seven of the past eight days, and have lost about 5.4% to start 2024, according to Dow Jones Market Data, while the Nasdaq has slipped about 1% year to date.
Tesla stock is weak despite delivering a record, and better-than-expected, 485,000 cars in the fourth quarter. That compares with about 405,000 in the fourth quarter of 2022.
“Tesla has seen an orderly pullback above its rising 200-day moving average, and it is now short-term oversold on neutral intermediate-term momentum,” says Fairlead Strategies founder, and market technician Katie Stockton.
Market technicians look at stock charts to get a sense of how investors feel about any stock and to help predict where shares will go over the short and medium term. Oversold essentially refers to a stock dropping far more than expected, with the bad news causing excessive damage. Such stocks are typically due for a rebound.
In the case of Tesla, however, there isn’t much bad news. CEO Elon Musk was in the news about alleged illegal drug use, reported on by The Wall Street Journal. But Tesla stock rose 1.2% on Monday, the first day of trading following the article.
The early 2024 action appears to be more about profit-taking to start a new year. Tesla stock more than doubled in 2023. Selling stock early in any new year avoids paying capital-gains taxes until the next tax cycle. Selling at the end of 2023 would result in gains hitting an investor’s current tax filing.
As for momentum, stock traders like to follow it because, essentially, stocks that are going up typically keep going up and vice versa. Stockton doesn’t see any big change in momentum trends. In fact, “the uptrend is intact,” she says. “Resistance is now about $260 initially, and I’d like to see it hold above the 200-day moving average.”
The 200-day moving average is about $231 a share. Tesla stock is still above that. Resistance for Stockton is where Tesla stock might stall out when the current trend reverses.
The next big fundamental data point for Tesla shareholders is fourth-quarter earnings, due to be reported on Jan. 24. Wall Street is looking for earnings per share of about 72 cents, according to FactSet, down from $1.19 reported in the fourth quarter of 2022. Tesla sold more cars in the fourth quarter, but price cuts have pressured profit margins. Any commentary from Musk about pricing or EV demand will be as, or more, important than the headline numbers his company reports.
Write to Al Root at [email protected]
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