Tesla shares were 20% lower yesterday after the stock failed to achieve a listing on the S&P500. Tech stocks are also reeling from the latest news regarding the Japanese investment firm Softbank. In an article last week I said that Tesla stocks, “could drop another 15-20%”.
The correction in Tesla has seen the stock move from highs 0r $502.49 to a low near the $330 level. That price also marked the 50 day moving average and Tesla has found a bounce there to open 8% higher today.
The story of Softbank was another reason for the bullish posture in Tesla disappearing. The company is a major conglomerate with large investments in different sectors. The firm was at the centre of the collapse in the valuation of WeWork, a shared office space company that struggled with its property holdings.
Softbank has seen $12 billion removed from its market cap this week after it emerged the company had bought large stakes in tech companies like Tesla and then bought huge call option contracts to bet on higher prices. This left traders worrying that the Tesla gains were speculative in nature and the stock has since pulled back. The situation will be slightly embarrassing for Softbank and could see them refrain from making similar bets in the near future as investors show their dislike for the strategic pivot.
Tesla has fallen to test the 50 day moving average at $330 and the market has bounced here to retest the $358.50 level and this will be key for the path ahead. Bulls should put stop losses under that level for new longs. The Investing Cube Trading Course can help with risk management. Investors can sign up here.
