Tesla’s US$240 billion rally set to collide with a bearish signal
TESLA’S record-setting 13-day winning streak appears to be on a collision course with market forces.
The lightning-quick run added more than US$240 billion to the electric-vehicle maker’s valuation since late May, pushing the stock deep into the so-called overbought territory – a technical signal that typically suggests a reversion is close.
As if on cue, Tesla shares dropped as much as 1.3 per cent by 945 am on Wednesday (Jun 14), poised to end their longest-ever run of gains.
The 14-day relative strength index shows shares of the Elon Musk-led company have not been this overbought since November 2021, at the height of a broader bull-market and when investor enthusiasm for all-things EV had reached a frenzy.
The latest rally came alongside another wider mania for artificial intelligence-related investments, which has combined with receding fears of a hard recession and a host of positive news from Tesla.
That includes electric-charging pacts with legacy rivals General Motors and Ford Motor, and all of its Model 3 sedans becoming eligible for the full US tax credit. A cooler inflation data on Tuesday, which sparked a relief rally in the markets, helped the stock further.
“We think the market wants to believe Tesla is an AI name first, an auto company second,” Morgan Stanley analyst Adam Jonas wrote in a note late on Tuesday. “While we did not expect this recent rally in the company’s shares, we suspect many investors may be again looking at ways to justify the valuation beyond the confines of a unit x price automotive/hardware model.” BLOOMBERG
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Delivered to your inbox. Free.
Share with us your feedback on BT's products and services
