As we discussed in a note earlier in October, TSLA shares had formed a double-top and the long-term uptrend in the shares was at risk of being breached. Since that time, shares in Tesla have made an aborted rally and are now falling through near-term support; the uptrend now having been firmly broken.
At this time, shares of TSLA are a little oversold and we might see a little bounce. However, any rally will likely be met with heavy selling and the next support at $300ish per share is likely to be tested in the not too distant future.
Fundamentally, it’s hard to argue that shares of Tesla are anything but dramatically overvalued. Thus, there is very little fundamental support for the stock and it could easily drop down to levels that will shake the faith of even the most diehard supporter of Elon Musk.
Cult stocks are great…when they are headed in the right direction. However, much like Bitcoin, when there is very little value underlying the shares, they start to resemble a Ponzi Scheme. Tesla is like that; the only reason to own it at this price is that you think someone will pay a higher price in the future. The typical reason for owning a stock (future earnings stream) is really just a glimmer in the distance for this company.
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