Time To Get Defensive With Tesla?
Jani Ziedins | Feb 17, 2021 12:26AM ET
Tesla (NASDAQ:TSLA) found itself at a critical inflection point on Tuesday, when it closed under the increasingly significant $800 level.
The $800 level has been supporting this stock since early January. We tested this level a couple of times since then, but both flirtations were quick and prices bounced decisively the next day. Will this time turn out any different? That’s the $764 billion dollar question.
TSLA reported record-breaking earnings late last month and the company threw fuel on the fire last week when it announced a $1.5 billion investment in Bitcoin. (Its purchase is already up nearly 50%!)
Surely the stock would be sharply higher following two-pieces of such bullish news… Yeah, no. The stock tumbled 8% following earnings and coincidentally enough, it is also fell 8% after the Bitcoin news.
Two pieces of great news and the stock fell both times. A stock that cannot go up on good news is a huge red flag. Either investor expectations are unreasonably high and even great news is no longer good enough. Or we are reaching the saturation point where everyone who wants to buy TSLA has already bought the stock and there is no greater fool left to keep pushing prices higher.
I’m not ready to give up on the stock simply because it closed a measly $3 under $800 on Tuesday. But it is enough to force me to take a more defensive posture. This stock is definitely ownable above $800, but we need to be really careful under this key support level. The stock surged $400 since November and even good stocks experience routine and even healthy step-backs on their way higher. The scary thing is a routine and healthy step-back could lop $200 off the price.
I’m not turning against Tesla, but as long as it stays under $800, this becomes a prove-it situation. The prudent move is to lock-in some profits and see what happens. If prices bounce back above $800 today or tomorrow, it is easy enough to buy back in. On the other hand, if prices challenge $600 support over the next few weeks, even better. Take those profits and buy the next bounce.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.