Technical Analysis: TSLA (Weekly) 16 January 2024

"The value of a stock hinges on two pivotal elements: firstly, the inherent worth of the company, shaped by its profits, losses, assets, and liabilities - its financial bedrock. Secondly, the public's perception of the company's value, influenced by its brand and market sentiment." ~ Adam Harris

The beauty of Technical Analysis is that it is emotionally neutral. It is the purest expression of the reality of the current (and usually implied) value of a stock, currency or commodity.

Its behaviour is not concerned with what we ‘think’ or ‘feel’ its behaviour ‘should be’. It is only the result of physical buy and sell orders ultimately being placed. 

So, why am I focusing on TSLA (NASDAQ:TSLA) today? I think this stock is in a potentially precarious price area, where both bull and bear sharks are circling. (sidenote: Bull Sharks are a real type of shark).

In the chart above, on the weekly timeframe, the stock’s price is converging into a point, a fork in the road, if you will. 

Most recently, price has also been ‘traveling’ within a downward-trending channel, within this triangle. 

TSLA is expected to report earnings on the 24th of January this year. Media and reporting have not been kind to the company over the last few months, and I will provide more context on that below, but for now, let’s focus on the technicals.

Technical Summary

As a general rule, on the weekly timeframe, if price is below the 50 period moving average, that is not good. It’s indicative of bearish sentiment. 

In addition, price is close to testing 2 significant price support levels, 212 and 194 respectively.

$194 is important, because if that level does not hold, then bears will start to engage, pushing price down to $165 next. We’ll deal with that when it happens. 

So, for TSLA bears, these levels are the ones to watch over the next 2 weeks.

For TSLA bulls, should price instead burst higher and close (close is important) above $268, then it will have likely won the toss-up for the foreseeable future. 

Here’s the thing: If we are in a bull market in general which we are, and the old adage sticks (“A rising tide lifts all boats”) then it should pull TSLA prices higher with other similar stocks. However, if other stocks are climbing, and TSLA is falling i.e. diverging away from the general market, that is cause for worry.

If the company is truly a good/strong/leading contender, then it should weather tough periods better than its competitors, no? 

General Observations

Now, as I wrap up, let’s highlight a few unavoidable observations.

BYD (Build Your Dreams) has now overtaken TSLA as the world’s leading EV manufacturer. 

There has been an extraordinary amount of negative reports about TSLA in the media recently, none of which are likely to help its share price in 2024. It will be interesting to see how it performs as the year unfolds.

To give readers some context, here are some of those headlines- I recommend googling further if one of them catches your interest:

• "Shareholders' constant optimism about Tesla, Inc. and faith in CEO Elon Musk mitigates the consequences of negative news. Tesla's margins are shrinking" - Seeking Alpha​​.
• "Tesla struggling to achieve financial outperformance; stabilization expected towards 2H24" - Seeking Alpha​​.
• "Elon Musk’s Tesla loses US$94 billion in market valuation as winter starts, marking its worst start to any year" - South China Morning Post​​.
• "Tesla's operating margin drops significantly, affecting its business in price war" - Seeking Alpha​​.
• "Tesla has burned a cumulative $4.2 billion in free cash flow over the past five years, including $3.6 billion over the trailing twelve months" - Forbes​​.

And then, there are the more possibly legally hazardous reports, and some of the recent issues surrounding Tesla, including poor service, vehicle recalls, Full Self-Driving (FSD) issues, and accidents:

Vehicle Recalls in China

Tesla recalled over 1.6 million Model S, X, 3, and Y electric vehicles imported to China due to problems with their automatic assisted steering functions and door latch controls​​.

US Vehicle Recall for FSD Software Update

In February, Tesla recalled 362,000 U.S. vehicles to update its FSD Beta software after the National Highway Traffic Safety Administration (NHTSA) stated that the vehicles did not adequately adhere to traffic safety laws and could cause crashes.

Blaming Drivers for Failures

A former Tesla employee reported that between 2016 and 2020, Tesla resolved around 400 aft link complaints in China, often attributing issues to user error​​.

Model 3 Glass Issues

The Tesla Model 3 had issues with rear glass cracking without any impact damage, believed to be due to the body of the vehicle flexing. This problem is acknowledged by Tesla and covered under warranty​​.

Leak of Complaints and Crash Reports

A data leak revealed thousands of complaints involving Teslas accelerating on their own, along with crash reports and allegations of emergency braking caused by faults​​.

Safety Complaints Allegations

There have been leaked customer data and numerous safety complaints against Tesla, with potential legal consequences if the allegations are proven​​.

Alleged Cover-Up of Complaints

Tesla is accused of having a secret program designed to cover up complaints about the range of their vehicles, with some cases where customers’ appointments with a Tesla technician were cancelled without inspection​​.

Conclusion

So, as I wrap up today’s piece, and as an early TSLA shareholder myself, I wonder if I’ve ever heard anything to this degree about any of Berkshire Hathaway’s constituent companies….

I do think the technicals will ultimately reveal how the market is going to decide what it believes the company’s potential is. 

Car reviews tends to favour TSLA over BYD and TSLA gets very positive feedback about its driving experiences and innovative technology. No doubt there is a lot to wade through.

I leave you with this, and let’s see what happens on or about the 24th January.

Disclaimer: Any content in this article is purely financial markets discourse and not financial advice. Please consult a regulated professional before making any financial decisions.