Tesla stock shows no signs of slowing down as the electric-vehicle company wraps up the year 2023. Investors should take note of the reasons behind the ongoing gains and stay vigilant for potential points of resistance in the rally.
In early trading, Tesla shares rose by 2%, outperforming the S&P 500 and Nasdaq Composite, which saw increases of 0.8% and 1% respectively.
While news-wise there isn’t much to attribute these gains to, it is worth mentioning that Reuters reported a recall of certain Model S and X vehicles in Norway. However, since these models have lower production volumes, the impact on Tesla’s overall performance is expected to be minimal.
Recalls are a common occurrence across the auto industry and do not usually significantly impact stock prices. With millions of vehicles being recalled every year to ensure safety on the roads, the associated costs seldom raise concerns among investors.
To put things into perspective, a recent recall from Toyota affected around 1 million vehicles due to an airbag issue, while Honda recalled 2.5 million vehicles for a fuel-pump problem. In comparison, Tesla recalled approximately 2 million vehicles to update warnings related to their driver-assistance features.
Furthermore, the overall market’s performance also contributes to Tesla’s current gains. Given Tesla’s inherent volatility, it is not uncommon for the stock to outpace broader market indices when they show positive movements.
The influence of Cathie Wood, founder of ARK Invest, is also worth noting. Wood’s firm purchased around 111,000 shares of Tesla stock across two funds on Wednesday. Wood has been a long-time advocate for Tesla, and the company represents the second-largest position in ARK Innovation ETF, with Coinbase being the largest holding.
Investors should also consider recent Chinese data indicating that Tesla is on track for a record-breaking quarter in terms of deliveries. It is anticipated that approximately 475,000 vehicles will be delivered globally during the fourth quarter.
In addition to the various factors mentioned, studying Tesla’s stock charts can provide valuable insights into its future performance, helping investors make informed decisions.
A short-term breakout occurred last week for Tesla, which has reversed its downtrend back to July, says Fairlead Strategies founder Katie Stockton.
Tesla’s stock, which had been steadily declining since July, experienced a significant turnaround last week. This positive shift has caught the attention of investors and analysts alike.
Resistance at the $295 Mark
Resistance remains around $295, which could become relevant in Q1.
Despite the recent uptick in price, Tesla faces a critical resistance level at around $295. The ability to surpass this obstacle will be crucial for the stock’s performance in the first quarter of the year.
A Potential Hurdle at $257
A key level to get through now would be the 61.8% retracement of the entire July to October decline, which is near $257, adds CappThesis founder Frank Cappelleri.
In the journey towards recovery, Tesla must also overcome a significant hurdle at the $257 mark. This level represents a 61.8% retracement of the decline that occurred between July and October. Successfully surpassing this level will signal further positive momentum for the stock.
Analyzing Technical Patterns for Market Insight
Stockton and Cappelleri are technical stock market analysts who employ chart patterns to gain insights into investor sentiment and short- to medium-term trends. The analysis of their findings provides valuable information regarding stock performance.
Overcoming a Significant Decline
Tesla’s stock suffered a significant decline from trading near $300 a share in July to trading below $200 in October. Recovering most of this decline is an encouraging sign for traders and investors to regain confidence in the stock.
Considerable Headwinds Ahead
Despite the recent positive developments, Tesla still faces some challenges. Wall Street analysts have lowered their estimates for Tesla’s deliveries in 2024, projecting around 2.1 million units compared to the previous estimate of 2.3 million units. Additionally, Tesla has implemented bigger sales incentives, including six months of free charging and discounts on Model 3 and Y vehicles in inventory. These factors suggest potential lower prices and volumes, which are generally detrimental. However, investors currently believe that the positive aspects outweigh the negatives.
Fourth-Quarter Deliveries Awaited
The upcoming fourth-quarter deliveries report from Tesla will be a crucial piece of fundamental data to monitor. Investors and analysts eagerly await this report, as it will provide further insights into the company’s performance.