- Tesla stock outperforms on Tuesday as stocks recover.
- The bounce is small though as Fed news awaited.
- Tesla is stuck in neutral ground.
Tesla recovered some ground yesterday after equity markets took a tough beating on Monday. While broader markets struggled to bounce, Tesla stock did at least gain over 1% in a steady session. Volume was low however so there was not much force to the move. This was the trend across most markets as investors wait with baited breath for the Fed announcement later on Wednesday. Not the announcement itself but the discussion afterwards about tapering and when and how that will begin. The Fed balance sheet is strongly correlated with the stock market since the pandemic began so any reduction or tapering could see stocks slide if the correlation continues. The Fed will be hoping this is not the case and the underlying strength of the economy is enough to placate investors from panicking.
The 15-minute chart of Tesla below shows a fairly lacklustre session with barely a $10 range, not great for day trading but markets are likely to adopt a wait and see tone ahead of the Fed later on Wednesday. To taper or not to taper?
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Tesla is nothing if not innovative and rumours have been swirling recently about a location for a new gigafactory to help with ambitious growth plans. Russia was hot on everyones lips but Elon Musk downplayed the speculation on Monday with ha tweet saying Tesla had not yet decided on a location for its new gigafactory. This morning news hits the wires of Tesla planning to offer car insurance to customers with Elon Musk tweeting “Probably next year before we get approval in New York”. Tesla already offers insurance in California and rumours suggest Teas is next up. Initially, this is not likely to be significant to the bottom line and hence investors but it may have longer-term implications if the company expands the offering.
Tesla key statistics
| Market Cap | $728 billion |
| Price/Earnings | 394 |
| Price/Sales | 23 |
| Price/Book | 29 |
| Enterprise Value | $756 billion |
| Gross Margin | 22% |
| Net Margin |
6% |
| 52-week high | $900.40 |
| 52-week low | $329.88 |
| Average Wall Street Rating and Price Target | Hold, $704 |
Tesla stock forecast
Yesterdays light volume day retraced us back to the $741 resistance, well just short of it. This bounce across all markets was not exactly impressive but it was never likely to be given the imminent Fed meeting. Risk is off the agenda for now. Tesla needs to break $763 before we turn bullish again as that takes out the high from last week and will put $780 back into the crosshairs. Otherwise, it is stuck in neutral. Look at that volume shelf above $760 meaning a break should see a price acceleration. This can be played with an out of the money call option for 1-2 week duration but only once $763 is broken in our view. Breaking the option related low from Monday last week at $708 puts Tesla into bearish mode.
FXStreet View: Neutral, bullish on a break of $763, bearish on a break of $708.
FXStreet Ideas: Buy a $780 call for 1-2 week expriy if $763 is broken. Buy support zone at $680.
