Tesla Stock Is Down Again. It’s Not From EV Competition.

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Tesla

stock is down again, dropping for a second consecutive day. Are investors fretting about more electric-vehicle competition? Probably not. The stock chart is a better explanation for Monday’s dip.

Tesla

stock (ticker: TSLA) is down about 2% in midday trading after dropping 5% on Friday. What’s more, shares are dropping while the market is moving higher. The

S&P 500
and

Nasdaq Composite
are up 0.9% and 1.4%, respectively.

That gap could make some believe Tesla bulls are worried, perhaps, about more EV competition. There is some reason for investors to be thinking about competitive products. There were more EV ads from

General Motor

(GM) and

Stellantis

(STLA) featured during the Super Bowl broadcast Sunday.

That probably isn’t it. The 2022 Super Bowl broadcast featured more EV ads than this year’s big game. And Tesla stock rose the day after last year’s Super Bowl.

The simpler explanation is the stock is down because it was up—a lot. Before Friday’s drop, Tesla stock was up for eight consecutive days. The run pushed shares up more than 100% from the 52-week intraday low of $101.82 on Jan. 6.

That has traders and market technicians thinking that Tesla shares were due for a pause. “Take profits on the double into resistance in a month,” wrote Evercore ISI technical analyst Rick Ross in a Monday report.

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Ross isn’t concerned with Tesla fundamentals. He’s looking at the stock chart to gauge investor sentiment and get a feel for where the stock is headed in the short-to-medium term. The resistance he is referring to is $200 level, which Tesla stock slipped beneath in November.

Ross is echoing what other market technicians such as 22V Research’s John Roque, Fairlead Strategies’ Katie Stockton, and CappThesis’ Frank Cappelleri have been saying recently. The stock looks stretched.

All four technical analysts believe the $200 level is key for Tesla shares. The stock spent a lot of time around that level in 2022 as investors worried about rising interest rates and inflation.

CEO Elon Musk’s purchase of Twitter is what finally sent Tesla shares below $200 late last year.

Ross doesn’t see a big drop coming, though. “Time to recharge, not re-short,” added the analyst in his report. He’d like to see shares consolidate gains and stay around current levels for a while. That’s what technicians call a base of support, and is healthy for a stock that moved so far so fast.

After the two-day drop, Tesla stock is up about 56% year to date, but they are off about 33% over the past 12 months.

Investors can look at stock charts for now, but there is a big fundamental event coming. Tesla is hosting its annual shareholder meeting and investor event on March 1. Investors and analysts will expect to hear about new vehicles, production ramp up, and costs and competition when management speaks.

That event could be enough to shake Tesla stock out of its $200 trading range.

Write to Al Root at [email protected]