The Tesla stock price cratered more than 5% yesterday before staging a late-day recovery. TSLA has now lost 9% in the last three sessions. But crucially, after breaking down yesterday, the price recovered the major moving averages and an uptrend, which could prove troubling for the shorts.
Tesla Inc (NASDAQ: TSLA) has been under the cosh recently. After three days of heavy selling, the EV automaker is on the brink of sliding below key technical support levels. The market is attributing the sell-off on the latest federal probe into accidents involving Tesla’s driver-assist system. However, I think it has more to do with the latest hedge fund 13F filings.
As I discussed yesterday with my article on ARK ETF (ARKK), the quarterly filing revealed Michael ‘the big short’ Burry is short the ETF which has a large holding in Tesla. And has increased his direct bet against the Tesla stock price, which prompted a Twitter response from ARK invest’s Cathie Wood, who insists that Burry just doesn’t get it.
Obviously, Burry, made famous by the Michael Lewis book and the subsequent movie, is well regarded. And more importantly, well followed. The news he is adding to his Tesla short has undoubtedly attracted some investors hoping to emulate the legendary short-seller.
However, selling TSLA is fraught with risk, and despite a barrage of bad news in the last few months, the Tesla stock price has a habit of recovering from near collapse. The question is, is it different this time around?
Over the last three days, the negative price action has forced TSLA to a significant area of support. Firstly, yesterday’s $648.84 low can now be linked to June’s low to create a rising trend line. This becomes key trend line support.
Above the trend, the 50, 100 and 200-day moving averages at $661.90, $658.72 and $665.18, respectively, add to the supporting technicals. Should TSLA sustain this support in today’s session, it would be an encouraging sign and potentially turn the stock higher, towards last week’s $720 high.
However, the Tesla stock price is only marginally above the considerable support levels. And if it slides below $648.84, an extension south to $620 looks probable. However, a deeper correction would target may’s $547.00 low point.
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