In One Chart: Possible Tesla bounce good for a trade, but not an investment, says technical analyst

by | Dec 21, 2022 | Stock Market

A potential bounce for beaten down Tesla Inc. shares could be worthwhile for short-term traders, but probably doesn’t argue for a long-term investment, a widely followed technical analyst said in a Wednesday note. “I have little interest in TSLA right now as an investment. It’s overvalued and run by a CEO who clearly has other priorities and who has effectively become public enemy number one to much of its potential customer base,” said Andrew Adams in a note for Saut Strategy, referring to Tesla
TSLA,
-0.17%
Chief Executive Elon Musk.

“However, I don’t think there has ever been a time when sentiment on TSLA was worse and yesterday it basically filled a gap from back in late 2020 around $136. Its 50-day moving average is way up at $193 so there is room for a reversion to the mean move even if TSLA ultimately falls more,” he wrote (see chart below).

Saut Strategy

Read: Tesla stock closes lower than $150 for first time in more than two years as analysts say they can’t ignore Elon Musk’s Twitter ‘nightmare’ anymore Tesla shares ended with a loss of 0.2% at $137.57 on Wednesday. The company is planning another round of layoffs for the first quarter and is instituting a hiring freeze, Electrek reported on Wednesday, citing a person familiar with the matter. See: Tesla stock looks to break losing streak after report of hiring freeze, layoff plans The decision, the report noted, would follow extensive growth for the company and a 61% drop for Tesla shares n the year to date. The stock has tumbled in recent months after Musk eventually purchased social-media platform Twitter Inc. Controversy followed Musk’s takeover, prompting criticism that he isn’t spending enough time minding Tesla. Tesla is one of the biggest year-to-date decliners in the S&P 500
SPX,
+1.49%,
which is down nearly 19% over the same stretch. Adams said that one of his better trades of 2022 “was mentioning Tesla as a short back in September near its reaction high,” a call that has been followed by “reader after reader” asking where they should consider buying it again. “The very fact that so many were wanting to buy it gave me pause, but I have now covered my short and yesterday dipped [my] toe in on the long side for a very small trade only,” he wrote. “Below $126 I would have no interest in it, but I figure risking around $10 to potentially make more than that on a bounce is a good enough risk vs. reward.”

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