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Buying or Shorting Tesla (TSLA)? Technical support & resistance

March 1, 2021 23:33
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What's happening with Tesla (TSLA) lately and where is price of this stock going? Here at Short Selling we look into what made Tesla fall drastically, some support and resistance levels to consider and how to go long or short in Tesla with the click of a button. Yes, if you opt for that, you can easily go with eToro from America or Skilling for European and Asian customers.

Where is Tesla shares heading?

Tesla is not a bad company, but shares look way too expensive according to many analysts. The recent 25% selloff could be the beginning of a much larger downturn. The company's fundamentals continue to improve, but with 648 billion USD market capitalization, this company/stock is still too expensive, in my opinion. The company is still priced for perfection, despite rising competitive pressures, and according to analysts, Tesla's market share will be threatened by new market entrants. Tired of Tesla's shares rising? You can go short or long with Skilling in Tesla.

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Tesla shares gone up lots the last year

Tesla shares have advanced from $95 to above $900 since the beginning of April 2020, even though the underlying business didn't perform nearly as well. Many analysts agree that there are plenty of reasons to be bearish on Tesla at the current stock price, especially if sentiment around the US stock market doesn't improve. Wall Street's three main indexes closed in the red last trading week as rising treasury yields continue to spook investors. The risk aversion will likely prevail next trading week, and March may bring more pain for stock market investors.

“The frenzy is fed by people getting commissions and other revenues out of this new bunch of gamblers, and, of course, when things get extreme, you have things like that short squeeze … and it's really stupid to have a culture which encourages so much gambling in stocks by people who have the mindset of racetrack bettors and, of course, it will create trouble, as it did,” said Charlie Munger, Warren Buffett's longtime business partner and vice chairman of Berkshire Hathaway.

Is FED helping?

The US Federal Reserve chief Jerome Powell also added a pitch of pessimism to financial markets; he said that the employment sector has a “long way” ahead in recovering. The real unemployment rate is probably closer to 10% than the 6.3%; according to Jerome Powell, he also repeated that the FED would keep rates wow as long as the employment sector remains subdued.

It is also important to mention that Tesla purchased Bitcoins for $1.5 billion recently, and the fact that Tesla's management put shareholders' money into crypto instead of business is not acceptable.

Technical analysis of Tesla in March, 2021

Tesla's shares have already lost around 25% from the recent top, and the risk of further declines is not over yet. With the trend still clearly pointing to the downside, we can expect that the price could soon test a strong support level at $600. One of the easiest ways to buy or short Tesla shares is through a margin trading platform. Many brokers allow this type of trading, with margin trades allowing investors to “borrow” money from a broker to make a trade. It's important to remember that there may be a leverage factor, which could either increase your profits or your losses. It's not a good idea to hold a short position for long periods or to leave an open position with no stop-loss order.

On this chart (the period from March 2020), I marked current support and resistance levels to help traders understand where the price could move. The more often price tests a level of resistance or support without breaking it, the stronger the resistance or support area is. When the price passes through the resistance, that resistance could potentially become support. Tesla (TSLA) has been a great performer over the last year when it came to price gains, and if the price advances again above $700, the next resistance could be located around $750 or even $800. The current support level is $650, and if the price breaks this level, it would be a “SELL” signal, and we have the open way to $600. If the price drops below $600, which represents very strong support, the next target could be located around $500.

Conclusion about Tesla

Tesla is not a bad company, but shares look way too expensive, and the recent 25% selloff could be the beginning of a much larger downturn. The company's fundamentals continue to improve, but with 648 billion USD market capitalization, this company/stock is still too expensive, in my opinion. Many analysts agree that there are plenty of reasons to be bearish on Tesla at the current stock price, especially if sentiment around the US stock market doesn't improve quickly. With the trend still clearly pointing to the downside, we can expect that the price could soon test a strong support level that stands at $600. If the price drops below $600, which represents very strong support, the next target could be located around $500. Ready to trade Tesla shares? US clients can use eToro for shorting Tesla (or buying), while Skilling is great for European investors.

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