Tesla has an active island reversal plus three open gaps on the daily chart.

Chart courtesy of StockCharts.Com, annotations by Mish

Chart Notes

• Gaps occur when a stock opens below the low of the previous day or above the high of the previous day, then stays there for a period of time.
• Island reversals occur when there are open gaps in two directions. The right side island reversal is still intact.

I am a firm believer that gaps close sooner rather than later. Indeed, that is the case for all of the gaps between October 2021 and August 2022. 

For mid-term traders, shorting gap breakdowns or buying gap breakouts and holding them is usually a mistake. 

Breakaway Gaps

Breakaway gaps can stay open for years. I suspect the October 2022 gap is a breakaway gap.

If so, forget about that top green box unless and until resistance at the 215 level is taken out. If that happens, look for the 265 level to act like a magnet.

The Gaps at 150 and 180

The gap at 150 is begging to be filled. But will the gap at 170 close first? 

I don't know, but I do know that anyone who chased that gap up in January of 2023 and held just gave back a 47 percent profit. 

Tesla's Profit Margins Take a Huge Plunge and It's Not Over Yet

Fundamentally speaking, Tesla faces weaker demand, rising interest rates, more completion, and stiffer rules for tax credits.

For discussion, please see Tesla's Profit Margins Take a Huge Plunge and It's Not Over Yet

Self-Inflicted Wounds?

Bloomberg called the wounds self-inflicted, but that's not entirely true. To get Biden's Inflation Reduction Act energy credits, Musk had to cut the price on Teslas.

Yet, sales are skidding despite the price cuts.

The economy is weakening and there is more competition in the EV space coming up. Those are not self-inflicted wounds. 

Whether self-inflicted or not, Tesla's market cap is down 50 percent from the peak and its forward PE is a lofty 51. And forward PEs don't always pan out.

Mystery Nonsense

On March 2, Wired commented on The Mystery Vehicle at the Heart of Tesla’s New Master Plan.

NEARLY FOUR HOURS into Tesla’s marathon Investor Day, someone in the audience tried again to bring Elon Musk, the Tesla (and Twitter and SpaceX) CEO back to the present day. From a stage at the Gigafactory in Austin, Texas, Musk had announced an ambitious “Master Plan 3” to save the world. For $10 trillion in manufacturing investment, Musk said, the world could move wholesale to a renewable electricity grid, powering electric cars, planes, and ships.

“Earth can and will move to a sustainable energy economy, and will do so in your lifetime,” Musk proclaimed. More details will be revealed in a forthcoming white paper, he said. But the presentation was short on specifics on the one part of the electric transition that is in Tesla’s gift: the next-generation vehicle it has been teasing for years, promising something that is more affordable, more efficient, and more efficiently built than anything in its current lineup. The vehicle, or group of vehicles, will be crucial to hitting Tesla’s goal of selling 20 million vehicles in 2030; it sold 1.3 million in 2022.

What, an investor asked the company’s executives, would that vehicle be? Musk declined to share. “We’d be jumping the gun if we answered your question,” he said, explaining that the company would hold a separate event to roll out the mystery vehicle somewhere down the line. Slides shown during the presentation just showed images of car-shaped forms under gray sheets.

Mystery Vehicle Ghostware 

The mystery vehicle is vaporware, more accurately ghostware. "Slides shown during the presentation just showed images of car-shaped forms under gray sheets."

 It does not exist and may never exist. 

There is not even a white paper on Musk's save the world solution. 

Market Share Plunges 

Tesla Market Share In California Tumbles To 59.6% From 72.7% https://t.co/lKwyGrMucm

— zerohedge (@zerohedge) April 24, 2023

Tesla got 59.6% of the California EV market from January to March, down from 72.7% for all of 2022 and the lowest since 2017, according to Reuters calculations based on data from the California Energy Commission.

That's still an incredible market share but how much profit? 

Doubling Down on Price Wars

Tesla boss Elon Musk doubled down on the price war he started at the end of last year, saying the electric vehicle maker would prioritize sales growth ahead of profit in a weak economy https://t.co/onJ9N1UP6u $TSLA

— Reuters Business (@ReutersBiz) April 20, 2023

Musk said that Tesla can cut profit margins to zero and no other manufacturers can follow.

The idea is that Tesla can make a fortune by charging for self-driving software down the road.

"Tesla is in a uniquely strong strategic position because we're the only ones making cars that technically we could sell for zero profit for now and then yield actually tremendous economics in the future through autonomy. No one else can do that. Not sure how many of you will appreciate the profundity of what I've just said, but it is extremely significant," said Musk

That assumes Tesla can beat Waymo (Google), something I highly doubt.

Meanwhile, what is a car manufacturer that makes no profit worth?

Ark's Cathie Wood Sets $2,000 Price Target

Video Length: 00:04:11

Cathie Wood bets on Musk's "robo-taxi" idea that may happen later this year. 

Her target is $2,000 by 2027.

With that out of the way, let's return to the technical picture.

Tesla Weekly Chart 

TSLA Chart courtesy of StockCharts.Com, annotations by Mish

If you have a large enough crayon, Tesla is sitting right on weak support, but with an open gap above on the daily chart. More accurately though, Tesla broke weekly support.

The next support level is 120 with strong support at 100. But there is an open gap below at the 80 level that is begging to get filled. 

$80 or $2,000?

I suggest 80 is far more likely than what I consider a preposterous target of $2000.

Tesla has  3,160,000,000 shares outstanding. At $2,000 per share, Tesla's market cap would be $6.32 trillion. US 4th-quarter annualized GDP in 2022 was $26.14 trillion. 

Wood estimates the valuation of Tesla will be between a fifth and a quarter of the US GDP.

Yeah, right. 

ARKK Innovation Fund

ARKK Chart courtesy of StockCharts.Com, annotations by Mish

ARKK is Cathie Wood's flagship innovation fund. It's down 76.68 percent from its all time high. 

Three days ago Cathie Wood bought 219,810 shares of Tesla in its flagship Ark Innovation ETF and another 36,213 shares of Tesla in its Next Generation Internet ETF.

Good luck with that.

More By This Author:

The Strangest US Treasury Yield Curve In History, What's Goin On?
Fantasy Of The Day: The US Consumer Is Holding Up Well
Credit Default Swaps Imply A Two Percent Chance The US Defaults