Tesla’s Massive Surge In Price
Tesla has had massive gains over the past few weeks, but what’s behind all this momentum driving the stock’s price up? Let’s analyze the massive growth technically, and fundamentally.
The Technicals
Tesla’s stock on the daily interval (Figure 1) has one support and two resistance trendlines drawn. The breakout of the white resistance trendline indicated that the stock may be breaking out of it’s short-term corrective structure. With that in mind, an investor may have bought there, or waited for it to break through it’s previous short term high at the red trendline. As the price approached the red trendline, it met an area of resistance where it shortly pulled back, before breaking out giving a buy signal to investors.
If we were to look at the bigger picture with the weekly interval in figure 2, the RSI which is used for finding when a stock is overbought or oversold, became oversold giving a buy signal just before the stock reversed. As it was at a previous low, which the bottom red trendline indicates, it was an area of support where an investor could have bought with a tight stoploss below it in case it did not reverse. However, as it started to rise there was a key resistance level far ahead that could have been used for another entry. The upper red resistance trendline has been strong since mid 2017, and as it broke through that major level it gave another possible buy entry.
The Fundamentals
Looking at the fundamentals, there are many reasons that boost confidence in the stock. Below are three of them.
When Tesla revealed for the CyberTruck, there was a massive number of preorders. Not only did the rapid amounts of preorders show the demand for the vehicle, it showed how Tesla is able to secure money within a short period of time. Within 3 days, Tesla had reached 200K preorders which cost $100USD to place. Although these preorders are refundable with some saying it’s a bad thing as it’s too low for the vehicle’s price of $39,900USD, some also say that this was a way for Tesla to get a temporary loan with no interest rate.
In December 2018, Tesla had started working on their Gigafactory 3 to increase production. In just a year they managed to start production from their factory a month ahead of schedule, aiming to initially hit a target of 250,000 electric cars annually. However, with the coronavirus causing the government to order a shut down, they’re also expecting a production delay of roughly one week.
Tesla had also surprised analysts with having a profit of $342 million after analysts had expected a net loss. Tesla had also delivered approximately 367,500 vehicles in 2019, which was 50% higher than in 2018.
While I am weary of the stock’s vertical rapid growth, with Tesla’s rapid expansion including their Gigafactory 3 in Shanghai and upcoming Gigafactory 4 in Germany, ability to gain large amounts of money in short time, and surpassing expectations, it’s no doubt that fundamentally Tesla grew rapidly while the technicals looked bullish and had allowed investors to find their entries.
