Price war suspends! Tesla to bottom out? (03/20/2024)

Hello, everyone! This week, we’re honing in on Tesla Inc. $Tesla(TSLA.US)$ to unpack the latest trends and dissect the company’s recent market movements.

What’s new?

On Monday, March 18, 2024, Tesla’s stock saw its biggest single-day surge of the year, climbing 6.25% after the company revealed price hikes for its Model Y EVs in several European nations and the US.

Tesla announced on Saturday a price rise of about 2,000 euros ($2,177) for Model Y vehicles in certain European countries starting March 22. Furthermore, on Friday, the company stated that all Model Y prices in the U.S. would go up by $1,000 from April 1.

Tesla had previously initiated a price war to maintain its EV sales, causing a notable decline in the company’s profit margins. Yet, competition in China, the largest EV market globally, has grown fiercer since the price reductions began a year ago.

The recent announcement of EV price cuts has provided a boost to investor confidence, as evidenced by the positive reaction of the company's share price.

Wall Street analysts have raised some red flags regarding Tesla’s near-term outlook. On Monday, in response to concerns about production hurdles and market dynamics that may affect Tesla’s results, Goldman Sachs adjusted its perspective on the automaker. The financial firm reduced its price target for Tesla’s stock to $190 from the previous $220 but kept a neutral rating.

Goldman Sachs has also adjusted its delivery estimates, predicting that Tesla will deliver 435,000 vehicles in the first quarter, down from the previous estimate of 475,000. The forecast for total vehicle deliveries in 2024 has been reduced to 1.98 million, representing a 9.5% year-over-year increase, down from the prior expectation of 2.08 million.

It's worth noting that Tesla's performance this year has been the worst among the Magnificent Seven, plummeting by over 30%. While some traders may view this as a potential buying opportunity, opinions remain divided.

Chart of the day

Since the second half of 2023, TSLA has been on a downward trend, with the stock currently hovering at 10-month lows. However, there are indications of a potential short-term rebound.

Trend analysis:

1. Following the announcement of Tesla's 2023 Q2 earnings, TSLA plummeted by 10%. Reduced average sales prices affected the company's profit margins, leading to the start of a downtrend in the stock.

2. TSLA fell by 9% again after Tesla's 2023 Q3 results were released. This was the first time since its 2019 Q2 report that the company missed expectations for both earnings and revenue.

3. Tesla's 2023 Q4 results, which showed weak auto revenue and a warning of slower growth in 2024, caused TSLA to plummet by 12%.

It is clear that the company's earnings results have been a significant driver of the stock's downtrend.

Technical indicators:

Despite being in a downtrend since the second half of 2023, TSLA is showing some positive indications on a series of momentum-based oscillators.

The daily chart reveals several positive technical signals, including a potential bullish crossover and bullish divergence on the MACD, a bullish crossover on the KDJ below the 20 oversold territory, and bullish divergence with the RSI crossing above the 30 oversold territory.

These technical signals are also evident on the 4-hour chart.

Next move?

Looking ahead, TSLA is likely to continue to trade in the descending channel for a while, despite the potential upside momentum.

Swing trading strategies might be beneficial for traders seeking to take advantage of potential price fluctuations within the channel. It might be a good idea to keep an eye on the two price gaps surrounding the $185 and $165 levels, as they might eventually close.

This presentation discusses technical analysis, other approaches, including fundamental analysis, may offer very different views. The examples provided are for illustrative purposes only and are not intended to be reflective of the results you can expect to achieve.

All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.