04 Jun Analysis of Tesla! Buy or Sell? (part 1)
In January 2020 I made a forecast for Tesla stock which you can check here. The share price was around 524 USD then.
The January forecast is displayed in the chart above.
And here you see the actual market state, up to early June 2020. On the whole, the forecast can’t be called “unsuccessful”, but the targets were objectively underestimated because the actual results turned out to be better than expected. Even if the dynamics of stock movements partly coincides with the wave structure, these are different levels on the whole. So, the long-term scenario must be corrected.
It took me much time to find out the reason of that mistake. Finally, I gained a clear insight into the situation which I’d like to share with you. Let’s start.
To take the right decision, competent investors check a company’s reporting, the dynamics of its financial indicators over a few years and its board members. They also analyse the market, learn about the company’s plans and gain other important clues. This type of investors is in the minority. They usually are governors of large hedging funds and owners of so-called “long money” or “intelligent money”. It’s important to observe those investors’ behaviour and try to understand their motives because they are indicative of future many-year trends. To sum up, it’s fundamental factors and a long-term investment span that are crucial to success in the classic stock market.
However, Tesla is a pattern-breaker. Elon Musk is someone who loves shocking behaviour and publicity. He often appears in public and turns presentations of new and future products into a show. His management team stays in the background and many don’t even know it exists. So, Elon Musk’s personality is strongly linked to his companies. His personal success or failures therefore affect the quotes of Tesla, Musk’s only publicly listed company.
Because ordinary people can easily access the market and because Elon Musk has been such an attention whore, Tesla price is a Musk confidence index. I’m going to prove it now.
Tesla outran such giants as BMW, Mercedes-Benz and Ford Motor in January 2020 and ranked second after Toyota Motor. Then it was obvious the company stock price had nothing to do with its fundamental indicators.
The history of hype around Tesla starts with Musk’s presentation of the future Cybertruck. The show didn’t go smooth as we know: the Cybertruck windows shattered after having been struck by a steel ball during demonstration of their shatter-proof qualities.
That event was associated with a 7% slump in the company’s shares.
That slump also confirmed that lots of private investors are guided by Musk’s public performances and not by the company’s fundamental indicators. Elon Musk’s excuses and publication of a successful shatter-proof test the following day didn’t save the situation.
The stock started growing only after Musk’s Cybertruck was spotted near the Nobu restaurant (photo source).
Elon takes the CyberTruck out for a spin in Malibu. I think these angles are the most flattering I’ve seen of it. Thoughts?
— Jon Rettinger (@Jon4Lakers) December 8, 2019
Obviously, Elon Musk hadn’t been using the prototype for personal needs and that drive was a well planned viral marketing action. On the one hand, it cost nothing. On the other hand, it heated the craze and hit the sceptics who had asserted the car would never be seen in the streets.
The photos were published on 9th December 2019 and since that day a strongest bullish trend had started.
The stock approached the psychological level of 1,000 USD twice, but the coronavirus panic had its effect and the price started falling together with the stock market.
The chart above shows that Tesla price started falling simultaneously with the market (the chart shows the S&P500 index for comparison). We see that TSLA fluctuations are two times bigger, which proves again the presence of many unqualified investors who bought Tesla on hype. The chart also shows that Tesla started recovering positions 5 days before the index did even if their fall had occurred on the same day.
The growth started on 19th March, right one day before Musk tweeted about COVID-19: “Based on current trends, probably close to zero new cases in US too by end of April”. Musk’s fans must have taken this message as a signal to buy, which they did.
Based on current trends, probably close to zero new cases in US too by end of April
— Elon Musk (@elonmusk) March 19, 2020
But the H1 chart above shows that buying volumes soared and calmed down within 1 hour in an absolutely dead market in a bearish trend just 1 day before the above tweet. It’s hard to imagine that someone except Musk himself or his people should want to buy those huge volumes of Tesla stock in those circumstances.
Another example of manipulation is when Musk announced that Tesla share’s price was too high (original tweet).
Tesla stock price is too high imo
— Elon Musk (@elonmusk) May 1, 2020
It occurred on 1st May (red arrow no 2 in the chart above) while a sell-off started one day earlier. Was that a coincidence too? I don’t think so.
We’re witnessing another stock price growth now, which has exceeded general market movements. Obviously, this growth isn’t supported by fundamental reasons. The optimism comes from investors who believed Elon Musk again after the successful launch of Crew Dragon. You may wonder what it has to do with Tesla. Nothing!
This fact just like all the previous cases only shows that Tesla’s stock price is crowd-dependent and doesn’t depend on fundamental factors. It rather reflects the Musk confidence index and has nothing to do with his car company.
So, what kind of a future is in store for Tesla and where are the trading targets located?
The continue of analysis is here – link here
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Good luck and profits, everyone!
I’d like to remind you that all materials are provided for educational purposes only. They aren’t financial advice and don’t guarantee any profits. All trading decisions you make are your responsibility only.