Tesla (NASDAQ 🙂 stocks plunged Monday, falling 9% during the US session. It was the worst one-day slide for the electric vehicle manufacturer's stock since September.
Also, shares are down nearly 19% since the beginning of 2021 at yesterday's close. In a tweet aired Monday, Euro Pacific Capital CEO Peter Schiff, who is famously skeptical of cryptocurrencies, blamed Tesla's recent $ 1.5 billion investment for helping to keep its stock in a bear market. to float. We disagree. For various reasons.
First, even if one were to rely on the arbitrary 20% meter used to determine a bear market, the stock is down only 19% at this point. For investors who remember the market's sharp sell-off in December 2018, when it fell a fraction of a percent less than 20%, remember that it came back with a vengeance afterward.
In addition, a 9% loss in value in one day is disproportionate to the automaker with a $ 1.5 billion stake in Bitcoin. That investment is only a fraction of Tesla's $ 686 billion market cap – and that's after yesterday's sell-off.
We can accept that Schiff's tweet may have had an impact on investor sentiment, especially as Tesla & # 39; s CEO, Elon Musk, was famous about the crypto asset class, even on occasion for tokens like Dogecoin and of course Bitcoin. through its purchase by the company of digital currency. And while Bitcoin is now about 15% from its all-time high it hit earlier this week, it's hard to prove that there is currently a significant correlation between the sell-off of Tesla stock and the collapse of the digital currency.
More likely, Bitcoin's origins were due to the fact that it had reached a market value of $ 1 trillion, which awakened some investors to the idea of ??taking a profit. And Tesla & # 39; s biggest sale took place on the same day that the entire tech industry took a beating.
Was it surprising that Tesla stocks underperformed the rest of the industry? Not when you consider that the stock has been outperforming its peers for so long. Tesla added a whopping 26% in value over the same period, compared to + 6.6% for the industry over the same period, as represented by the Technology Select Sector SPDR® Fund (NYSE :). As such, a 9% drop on Monday is fair enough as XLK is down 2.25%.
On the basics, it appears that investors are simply taking a profit after washing out the technology sector for all its worth, and then some, since the pandemic hit the economy. That said, it appears Tesla (and Bitcoin for that matter) is only in correction mode amidst what is still a strong upward trend based on the weekly chart for the stock.
Nonetheless, the most recent leg in the valley was so steep that there is room for another 30% decline, while remaining above the uptrend since the March bottom, although it needn't fall that far.
]
On the daily chart, the price produced a downward sloping H&S peak, meaning that demand was so overwhelmed by supply that it failed to form a proper right shoulder.
While this sends a stronger bearish signal, traders only received it after some of the minimal implied target had already been used up. A symmetrical triangle's neckline would have been around the bottom of the right shoulder, about $ 806, instead of $ 757, which is down $ 49.
Trading Strategies – Short Position Setup
Conservative traders should not go short in an uptrend.
Moderate traders would return shortly after that verifies the integrity of the cartridge.
Aggressive traders could go short at will, provided they understand and accept the risk – after reading this analysis – and work with a sensible trading plan in hand.
Here's an example:
Trade Sample
Entry: $ 750
Stop Loss: $ 775
Risk: $ 25
Target: $ 650
Reward: $ 100
Risk: Reward Ratio: 1: 4
Author's Note: This is nothing more than an example. The actual analysis is in the body of the text. Do not comment on this transaction if you have not read and understood the full analysis. It won't reflect you properly. By definition, a sample means that it is only one way to approach the transaction, even if the analysis is correct, and it may not be. You need to tailor a trading plan to your personal needs, including timing, budget, and temperament. If you don't know how to do that, just take small risks until you develop this skill, crucial to trading success.
