Did Tesla Sellers Go Off the Road?
As Robotaxi stalls and AI stocks and the Magnificent Seven pull back, there's a key price area on the EV maker's chart that investors should know about.
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On Thursday morning, Tesla TSLA reached its highest point of the year, trading at $271. At that point, shares of the Austin, Texas-based EV maker had gained over 37% since we alerted readers to the stock’s technical breakout on June 27.
Then, Tesla spun into a ditch. Thursday’s gains evaporated, and then morphed into an 8.44% loss. The selling continued, as the stock fell an additional 3% at Friday’s open before staging a rebound during regular trading.
The main culprit for Tesla’s rough ride was the company’s decision to push back its introduction of the Robotaxi, originally scheduled for August 8. Now that reveal has been delayed to October. According to reports, unnamed sources say modifications are being made, and additional prototypes are being prepared.
While Wall Street seems shocked by the delay of the Robotaxi, it’s par for the course. For example, Tesla’s Cybertruck was revealed in November 2019. By the time the first Cybertruck delivery occurred in November 2023, four years had passed.
Tesla CEO Elon Musk often sets goals and deadlines that are difficult, if not impossible, to achieve. He has always worked this way, back to his early days with X.com, which eventually became part of Paypal PYPL.
Investors are wondering if Tesla’s sharp decline creates an opportunity to buy the stock. A glance at the chart reveals that Tesla has had difficulty climbing above the area between $265 and $270 (blue line). Thursday represented the third rejection in that space within the past eight months (red arrows).
Because of that looming resistance area between $265 and $270, buyers should exercise caution here. Thursday’s selloff occurred on the stock’s heaviest volume in over two months, so it’s safe to assume that institutions were involved.
Swiss banking giant UBS recently downgraded Tesla to a "sell" rating. Tesla’s next earnings report is scheduled for July 23, less than two weeks from now.
A secondary cause for Tesla’s selloff is a general pullback in AI-related stocks. Readers were alerted to a coming pullback in this sector on June 7. The AI sector has been one of the darlings of 2024, but the valuations of many of these names are now stretched, and their technicals are losing their bullish bias.
A softer-than-expected CPI report increased expectations for rate cuts later this year, igniting a rally in interest rate-sensitive names and small-cap stocks. This rotation could be pulling money away from market darlings like Tesla, as well as the mega-cap names that comprise the so-called Magnificent Seven.
Bottom Line
With earnings and sector rotation now near-term concerns, and a resistance level looming nearby, investors should exercise patience with Tesla.
