Tesla And Market Update

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I thought last night Tesla shareholder and “battery day” event was impressive overall. But it lacked clarity, and the longer time horizon apparently didn’t live up to the hype for a stock already up 400%+ year to date. Investors aren’t patient.

The stock is down 10% today and looks poised to retest the 50-day moving average. The lower high makes me believe it won’t hold this time. The stock is likely to drop to the $270 level next.

Given its lofty valuation (even for speculative future results), I wouldn’t add to my position unless it got back to the vicinity of the March highs around $194. Long term I do like the companies opportunities as now not only an auto-tech company but a battery & auto tech company. I’ll always hold a position as long as Musk remains in charge. I think it’s important to support these ambitious entrepreneurs – from a business standpoint – despite their perceived shortcomings in other matters.

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A lot rides on the direction of the broader market. After the breakout to new highs, stocks have lost steam in the last few weeks. The Nasdaq 100 (QQQ) has now spent a few days below the 50-day moving average.

Based on seasonality (which we’ll discuss next) and historical patterns (also discussed next), I would not be surprised to see a drop to at least $251.15, and probably closer to $237.47 (still another 10% below current prices) before the market builds a base for its next rally.

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In terms of seasonality -during election years – late September through late October has shown weakness for whatever reason. If this seasonality plays out, we could be in for a few more weeks of selling. This is not unusual and its not the end of the world. Markets were up between 60% and 80% off their March lows. And markets don’t move in a straight line.

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Disclosure: I own TSLA.

Disclaimer: None.

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