Tesla Inc. (NASDAQ: NASDAQ:TSLA) shares have made a significant recovery, rallying over 11% and closing above the 200-day moving average (DMA) at $219.96 last Friday. This marked an uptick of 1.6% in premarket trading on Monday, following an uptrend that began in January from a 2 ½-year intraday low of $101.81.
The rally comes after a series of rough weeks for the electric vehicle manufacturer, which saw its shares drop about 53% from its July high of $299.29 to an October low of $194.07 following a disappointing earnings report. Despite the setback, market analysts suggest that the previous trend remains intact if retracement stays within the Fibonacci ratio or "golden ratio" of 61.8%.
However, Tesla's stock faces substantial resistance just above current levels, defined by a price gap between October's low of $242.08 and high of $230.61, and the broken uptrend line around $246.
To challenge the larger downtrend that started two years ago from an all-time intraday high of $414.50, Tesla would need to rally at least 13% from the broken uptrend line. This downtrend line extends to about $278 and is strengthened by touching highs in January and April 2022 and July 2023.
The 61.8% Fibonacci retracement of the selloff from the all-time high to January's low would stand around $295, indicating long-term bearish control as this is where the bounce off January's low ran out of steam.
To declare the two-year downtrend over, Tesla's stock would need to close above $295 and sustain those gains, requiring a further 34% rally. The recently broken 'triangle' pattern warns of more potential selling pressure.
Despite falling 13.4% over the past three months, Tesla's stock is up 78.6% year-to-date, outperforming both the Global X Autonomous & Electric Vehicles ETF DRIV and the S&P 500 index SPX. A full retracement of the two-year downtrend would require a further rally of about 41% from the 61.8% Fibonacci chart point.
InvestingPro Insights
As we delve into InvestingPro's real-time data and tips, we find that Tesla's market cap is an impressive $714.84 billion USD, reflecting the company's strong position in the market. The P/E ratio is high at 64.3, indicating that investors are willing to pay a premium for the company's earnings. Over the last six months, the company experienced a large price uptick of 29.34%, despite a recent dip in the past month.
InvestingPro Tips highlights that Tesla yields a high return on invested capital and holds more cash than debt on its balance sheet, both positive indicators of the company's financial health. However, it's worth noting that 23 analysts have revised their earnings downwards for the upcoming period. Despite this, Tesla remains a prominent player in the automobile industry and has given stockholders high returns on book equity.
There are many more insights to be gleaned from InvestingPro's comprehensive data and tips. In fact, there are 21 additional tips listed on InvestingPro, offering a wealth of information to anyone interested in making informed investment decisions. This highlights the value of the InvestingPro product for those seeking to stay ahead of market trends and make well-informed investment decisions.
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