Charting is pure human psychology. Topping and basing patterns are about the investor herd building or dumping a position that gives way to bullish breakouts once sellers evaporate or bearish breakdowns once buyers evaporate.
Tesla has an enormous topping pattern. The top is so large that technically the target is below zero. That doesn’t mean zero is a valid target, but it does mean that’s a massive top. Everyone who bought Tesla in the past 2 years has lost money, some of them a lot.
Elon said the stock was too high below $50 per share (split adjusted), long-term support (the bottom red line) points to around $30 and there is a gap at $17 per share.
I don’t need a fundamental justification for putting a trade on the stock. The chart can provide an entry and exit level. Often times, bad news emerges later. I do have higher confidence when there’s a fundamental reason, when I can imagine a huge gain or loss down the road, but it isn’t necessary.
I have no dislike for Musk. I like what he does with rockets. I don’t hate EVs (electric vehicles) as long as they’re privately funded and not a government conspiracy aimed at impoverishing and controlling the population. Electric vehicles in the transportation fleet can extend the life of the petro-economy while keeping fuel prices down. Competition is a good thing. I can also think Tesla might fall 90 percent off its high, as Amazon fell more than 90 percent in the dotcom bust.
If you are a Tesla fan though, maybe you need a reason. If you’re into conspiracies, then I have a rather straight-forward one. I assume my readers know about ESG and how it has turned into a vehicle for Woke politics. When your broker asks if your investment’s align with your values, he doesn’t mean your values, such as Christian and Islamic. He means leftist politics. Blackrock is the kingpin of Woke tyranny expressed through financial markets, thanks to its large suite of passive funds that control trillions in investor capital. Most investors outsource their investing to funds and those funds get to vote their shares.
Trillions of dollars are invested in funds that follow ESG rules. A hard conspiracy says firms with ESG rules will kick Tesla out because of “hate” on Twitter or some other concocted excuse. A softer conspiracy says ESG is prevalent in finance because there are a lot of leftists in finance. They will drop Tesla to punish Elon.
Leftists are also big into EVs. They loved Tesla and Elon, and bought shares in Tesla. They are holding the stock now and taking losses. If they didn’t own the stock, they might do nothing, but since they own it, they can dump it and send the stock lower.
Now go back to the above. I don’t need a reason for Tesla to drop, but Tesla must drop for it to complete the top and start a cascade of selling. If it doesn’t drop, then maybe the top is invalidated. Should it complete and move lower though, there will be reason for everyone to sell because they will be losing money.
The final piece of the puzzle: since Twitter went private, the only way to really hit Elon as a private citizen is by selling your Tesla stock or shorting it.
USG also hates free speech and with Twitter exposing USG’s violation of citizen’s rights, he’s also become a target for political persecution:
To summarize: Tesla benefited from the reckless spending and stimulus provided by USG and the Federal Reserve from 2020 to 2022. Similar to other growth stocks, it is giving back gains and at risk of a massive collapse with no other factors required except the end of said stimulus. Elon has become a hated figured by the left, and the left controls finance and government. Tesla doesn’t need a push to follow the path of Meta and the ARK Innovation ETF, nor does Amazon, Apple or Google to name a few, but it’s also likely some vindictive leftists will give it one anyway.
Do you also write IICS?