After bottoming near $540, shares enjoyed a near-45% rally to their high in April.
Now though, the stock is back under pressure. Despite CEO Elon Musk’s appearance on “Saturday Night Live” or the reports that Tesla is sold out for the quarter, investors just aren’t buying the stock.
Of course, it doesn’t help that the company said it will halt its Gigafactory expansion plans in Shanghai due to trade tensions between China and the U.S.
It also doesn’t help that ARK Invest is under intense selling pressure. As growth stocks get crushed, this ETF is front and center for investors. In its most well-known fund, the ARK Innovation Fund (ARKK) - Get ARK Innovation ETF Report, Tesla is the top holding.
Finally, with other top EV stocks like NIO (NIO) - Get NIO Inc. American depositary shares each representing one Class A 蔚来汽车 Report also under severe pressure, it’s hard for Tesla to find a bid.
Even though there’s good news to be had, investors are selling. That’s indicative of a bear market, which growth stocks are certainly enduring.
The question for investors: How long will it last?
Look at how quickly Tesla stock unwound from its first-quarter highs in January and February - with the top near $900 - and bottomed at $539.49 in early March.
That’s the hard part about investing in these types of names. The upside is great and can take months or quarters to play out. But the downside comes in a hurry and happens in a matter of days or weeks.
In this case, Tesla stock suffered a peak-to-trough decline of 40%.
After the bounce, the critical $700 zone failed as support. Now moving lower once again, shares are testing into the $600 level, which was support in late March. At the time, shares bottomed at $591.
This time around, this area also has the 200-day moving average nearby. That should provide an additional layer of support.
If it holds, bulls want to see a bounce back up toward the 10-day and 50-day moving averages. From there, the underside of uptrend support (blue line) is in play.
Should support fail, it puts the $540 low and the 50-week moving average in play. Below that and the breakout level from November (which is also the high from September) comes into play near $500.