Single name stocks are not my bailiwick, so get your salt grains ready. But we’ve all seen this movie before: A cult-like stock with crazy, revolutionary technology that loses to the 2nd, better funded, mouse that executes better.
And in the case of TSLA, it’s binary. Elon Musk wants the dream and will risk everything to get there. If the switch is flipped, TSLA could easily become a zero.
This is not something I wish, though I do think it is increasingly likely. Musk’s funding is not infinite, production and labor issues are mounting, and the competitors have finally woken up and are gunning for him.
Technically, we appear close to that breaking point. Investors look to the stock price as a sign of a company’s health–even when they shouldn’t. And when a company has chronic financing needs, a bad signal from the stock price–justified or not–can be fatal. The world of finance and economics can be brutally path dependent.
Here are two charts of TSLA that illustrate why the 300 level is meaningful. You can tell me until you’re blue in the face that round numbers don’t matter, but I know from experience we are not that rational. They matter. That’s why I have so may silly Dow hats (okay, not the only reason). And in this instance the round 300 level lines up with important support ranges on two important time horizons.
First, here is the one year chart:
Now, the 30 day intra-day price chart:
Even a TA tourist like me can see that the round 300 level we keep bouncing off is important support in TSLA’s price pattern.
If we close below 300 for a couple days in a row, odds are we are seeing the beginning of the end of the cult.