Tesla peaked on November 4, 2021 at 1243.49.
Flashback November 6, 2021
Elon Musk then started selling shares of Tesla.
Astute Observation
“Somehow Elon nailed the top.”
Tesla Weekly Chart
Technically, Where To From Here?
Technically, Tesla is sitting on very weak support right now. I am confident the top line will not hold although we could see a bounce.
Next support is roughly at the 550 level. I would expect a bounce there, perhaps a strong one, but I do not expect that to hold either.
If the 550 level does not hold, take a look at the 400 level. There are a lot of bars at the 400 level. Anyone who sold there might want back in. Also, people watch these levels. Technical patterns work because people, and computer algorithms, watch and act on these patterns.
Ultimately, I expect most of these levels will break hard.
Tesla Monthly Chart
Technically speaking, the monthly chart is ominous. There is no broad support until the “possible target” zone of roughly 35 to 100.
A strong bear market can and arguably should take Tesla to that area. Fundamentals bear that out.
Fundamentally Speaking
Tesla has a Price-to-Earnings (PE) Ratio of 297 as of January 25, 2022. Frankly, that’s insane.
Sure, it sells more Electric Vehicles (EVs) than any other company, for now.
The key words are “for now”.
GM, Ford, Toyota, Volkswagen and literally every car manufacturer in existence are all working on EVs.
Moreover, Tesla has numerous quality issues.
Elon Musk is undoubtedly a genius, but that does not make the stock (TSLA) a good buy.
Bell Ringer
Elon Musk accidentally rang a bell. It seemed so meaningless at the time. It’s only apparent in hindsight.
That is what’s so difficult about monstrous bubbles.
Timing the Top
It is very, very difficult to time the top. Mostly, it’s by accident. Those who time bubbles correct as in the “Big Short” are heroes. Some of those who shorted even 3 months early were blown out of the water.
Look at the lead chart again. How many shorted at 850 only to see TSLA rise to 1243 in less than a month.
Then look at the gyrations with several major bounces before the 2022 collapse. How many shorts got shaken out in those bounces?
Even the Bears Lose in Bear Markets
Even the bears tend to lose in bear markets! That’s because they short too early, get shaken out, or become bulls too soon.
I expect many bears who missed the big TSLA runup will become bulls too soon.
Right now TSLA is down over 30%. Some will find that attractive. Even more will find a 50% decline attractive.
But technically and fundamentally TSLA will not be a buy at 600 when it’s down 50%. If TSLA goes to where I think it should, many bears will be punished in what’s about to happen.
Big Losses Coming
The Huge Stock Market Bubble Just Popped and the Fed Can’t Rescue It
In case you missed it, please consider The Huge Stock Market Bubble Just Popped and the Fed Can’t Rescue It
ARK is down 55 percent since February. Fundamentally and technically much more is coming.
Is the Fed Delusional or a Big Pack of Liars?
Finally, please see my post Is the Fed Delusional or a Big Pack of Liars?
Is the Fed really this delusional or are they a big pack of liars?
In many ways I suspect both. Former Fed Chair Ben Bernanke denied there was a housing bubble.
Former Fed Chair Alan Greenspan warned of irrational exuberance in 1997 then in 2000 right before the dotcom bubble burst became a big believer in the productivity miracle.
Former Fed Chair Janet Yellen famously proclaimed she did not see another financial crisis “in our lifetimes”.
There is a history of constant delusion.
This decline has just started. Thank the Fed for blowing the third consecutive massive stock market bubble in just over 20 years.
This post originated at MishTalk.Com.
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Mish
Haha. I read him every day. I just don’t want to see him post his own articles and Twitter posts over and over. I’m not just rubbing him.
Musk told
everybody what he was doing and I appreciate that. He has also said many times
that the stock was overvalued and he is right. They make 30% gross margins on
every sell and their sales keep almost doubling. It has the best tech and the
best manufacturing which gives them 30% margins and the competition is nowhere
near neither in volume nor profitability. It like what Apple did. They invented
the market, the tech and the manufacturing and kept that lead. Now Apple gets
75% of all the profits of the smartphone sector from 2021 figures and all the
other manufacturers fight for the crumbs left over. Volume plus high margins
generates incredible cash. It’s overpriced for sure and if you don’t own it you
should be looking at what price to buy it. If you have owned it for a very long
time then you just hold it. They say you never go broke taking profits but you
also never stay in the really great money-makers for the whole ride either.