Tesla’s Space-Age Car Creates Awe, the Chart Pattern Creates Opportunity
Let’s check out the ‘jumping’ Roadster vehicle and why I see a potential short-term trading opportunity in TSLA.
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Flying cars? Hmm. Maybe that’s a little bit of an exaggeration. What you could maybe say is that on Friday morning, Tesla (TSLA) shares were soaring in response to what Tesla did on Thursday night in cahoots with SpaceX (SPCX). Elon Musk’s two cutting edge companies working together? Now that’s interesting.
Tesla shares traded higher overnight after unveiling the new Roadster, which Musk’s company claims can go from zero to 60 mph in less than a second. The vehicle shown also has a propulsion system, using SpaceX technology, that can make it fly. So, a flying car. Again, hmm…
Production is targeted for 2028, so this vehicle is not about to do anything to enhance the company’s ability to generate revenue anytime soon. What has investors excited, in my opinion, is Tesla’s high-end engineering accomplishment and the SpaceX crossover. One more time…hmm.
Psycho Circus
I’ve been waiting here to be your guide
So come
Reveal the secrets that you keep inside
Step up!
No one leaves until the night is done
The amplifier starts to hum
The carnival has just begun
– Stanley, Cuomo (KISS), 1998
Welcome to the Show
The event began with Tesla’s Roadster driving up a curved wall until, eventually, the vehicle was upside down. Wait. What? The car then jumped off the wall, righted itself, and landed softly. The new Roadster also, later in the show, jumped over the rest of Tesla’s lineup of available vehicles while spinning in the air.
So… it was flying?
No, not really. Jumping? Yes, the new Roadster does jump. The new Tesla Roadster can jump, hover for a short while, and flip, while also performing brief maneuvers once airborne. That’s incredible. The vehicle does these things using cold gas thrusters, which is the SpaceX contribution. The car cannot fly like an aircraft, but it is beyond cool. Not cool like cold-gas thrusters cool. More like Fonzie cool. Aaayyy!
Back to Reality…
With third-quarter earnings season now underway. Tesla earnings are due after the closing bell next Wednesday, Oct. 21. For the fiscal Q3, Wall Street is looking for an adjusted earnings per share of $0.45 on revenue of about $28.1 billion. There are real concerns. Results like that would compare poorly to the year ago results of $0.50 on very slight year over year revenue growth.
Interestingly, of the 26 sell-side analysts that I know of that cover Tesla, 18 have revised their earnings estimates in a downward direction since the quarter began, while just four have revised those numbers higher. Three of these analysts have left their initial outlooks unrevised.
The Chart, My Take
Readers will see a lot of generally sideways movement in the below chart. Note that this past February into late April, Tesla put together an inverse head & shoulders pattern of bullish reversal. That pattern did produce a smallish rally that failed this past May. The stock trended lower before truly gapping down on that Q2 earnings report in July. Ugly.
That gap was filled by late August as the shares developed the now visible “double top” pattern of bearish reversal with a $346 negative pivot. That pivot has been defended rather well of late but remains vulnerable going into the release. Tesla bulls will now look to professional managers to defend the stock at its currently rising 50-day simple moving average, while hoping the swing crowd gets on board at the 21-day exponential moving average. Loss of support at that thin blue line could force at least some of the pros to get out of Dodge and possibly put the lows of July back in play.
Moving on to my most relied-upon indicators, relative strength is now roughly neutral. Below the chart, the daily moving average convergence divergence is in an uncertain spot as well. The histogram of the nine-day exponential moving average (blue field) is now in negative territory, which is a sign of short-term bearishness, but that signal is hardly clear. In addition, the 12-day EMA is running slightly below the 26-day EMA. This too is bearish. Again, the signal is not clear. Those two lines, however, are both in positive territory. That offers the bulls some hope.
There’s a very good chance that professional managers keep this stock penned in between the 50-day and 200-day lines until earnings. that creates short-term opportunity for the likes of us, gang.
At the time of publication, Guilfoyle had no position in any security mentioned.
