Monday, April 22, 2024

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Buy a Tesla, but Sell TSLA Stock?

Gas prices, gas prices, gas prices… that’s all we’ve been hearing from politicians and the media over the past few days!

Not for nothing – record high gas prices are affecting not just our daily lives and wallets, but they’re also putting additional strains on virtually every sector of the economy.  

Ironically enough, those same people mainly responsible for the outrageous numbers on gas station signs are all preaching for one solution… Electric Vehicles! 

“Buy a Tesla”, they say!

Let’s set aside the obvious impracticality of such an idea and take a closer look at how the current macro situation is affecting the world’s biggest EV maker. 

And why, the “Buy a Tesla” moment may turn into “Sell the TSLA stock”.

Replacing Gas Cars with Teslas? Not so Fast!

Here’s a headline by Reuters from just a few days ago:

Just when it seemed that buying an electric vehicle would spare you the headaches of buying gas (indirectly) from some of the world’s more hostile regimes – one may be surprised to find out that much of critical EV components come from those very same places and nations. 

The Ukraine-Russia conflict did not just hike the price of oil and gas… It also had a major effect on the prices of lithium, nickel, and aluminum – some of the key materials for building electric cars. 

Here’s a quote from that same Reuters article:

“Rising prices of nickel, lithium and other materials threaten to slow and even temporarily reverse the long-term trend of falling costs of batteries, the most expensive part of EVs, hampering the broader adoption of the technology”

And it’s not just “smart”, analytical talk either, these trends have very real consequences. Here’s a Cars.com headline from just yesterday:

Here’s what the article had to say about the reasoning for the price hikes: 

“Rising costs of raw materials are likely key drivers of the escalating prices. On top of the ongoing supply chain disruptions, the recent conflict in Eastern Europe is exacerbating material shortages.”

As much as we may wish TSLA was the solution to all fossil fuels related problems, for now, that remains wishful thinking. 

Which brings me to Ben Sturgill, and his Tesla trade idea…

 

The Big TSLA Short?

Ben’s logic is simple and based exactly on what I’ve just described. Here’s what he wrote in an email alert earlier today:

“Much of the materials needed to make EVs like TSLA’s comes from two countries; China and Russia.

In fact with this recent conflict action, TSLA has had to raise their prices to make up for an already slim margin.”

Now, let’s overlay this thesis with the chart of TSLA:

Ben argues that TSLA’s recent price action may be attributed to this exact short-term uncertainty: 

“This could be why TSLA is ‘boxing in a range’ as highlighted from the chart above.“ 

He predicts: 

“If a rise in consumer prices continues, along with a stable oil level here above $100 a share, then the last thing on most people’s minds will be a new EV, let alone a TSLA.”

Based on the sum of fundamental and technical factors, Ben sees TSLA flushing to as low as $620 near-term, should the current consolidation resolves lower:

“What’s left to be seen is if TSLA can break out above $950, which is the ‘hard ceiling’ for the stock as of late, and near where the 50 days SMA is trending right now.  Or if TSLA dumps down to the 50% retrace around $620.”

Hence, here is his TSLA trade idea for the upcoming week

Is TSLA about to head lower? We’re about to find out! 

But if it does – don’t say Ben never told you!




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