Unpacking Tesla Stock's Wild Week

Tesla faced off with the psychologically significant 500% year-to-date gain level

Sep 11, 2020 at 2:36 PM
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A little over a month ago, I dove into the current state of Tesla Inc (NASDAQ:TSLA) and its impressive climb on the charts this year, breaking down the red-hot rally just ahead of its quarterly report. Soon after, the company reported a second-quarter earnings and revenue beat, and the delivery of more than 90,000 vehicles -- all in spite of a lag in production due to the pandemic. Since then, the electric car company shook up Wall Street after announcing a five-for-one stock split, which went into effect on Aug. 28, in hopes of making its shares more accessible to its employees and the bevy of retail investors suddenly swelling the ranks.

Unsurprisingly, following the stock split TSLA shares raced up to a record high $502.49 by Sept. 1, completing a trendline connecting higher highs that started at its early-March breakout. It was approaching several historic milestones, which of course is nothing new for the electric vehicle maker in 2020. Let’s review; on the first of September, TLSA was surpassing the psychologically significant 500% year-to-date level. And just above that record high stood Tesla’s $500 billion market cap, coinciding with a $536.59 share price.

The equity also briefly touched the 1,000% year-over-year gain. But this week serves as a sobering reminder, lest anyone forget, that uncertainty is always right around the corner. Over the next two days, TSLA proceeded to shed 5.8% on Wednesday and 9% on Thursday, as profit-taking swept up the broad-market tech sector. So close to glory, all of the aforementioned landmarks have proved to be a short-term ceiling, for the moment.

But there is a silver lining. Looking toward analyst sentiment, it’s clear that the electric vehicle make is well overdue for a fresh round of upgrades. Specifically, heading into Friday’s trading, 17 of 21 covering brokerage firms sport a tepid “hold” or “strong sell” recommendation. In other words, an unwinding of this bearish sentiment could send the security surging even higher.

Lastly, Tesla stock's Schaeffer's Volatility Scorecard (SVS) sits high at 96 out of 100. This means TSLA has tended to exceed option traders' volatility expectations during the past year -- a boon for option buyers. In conclusion, despite the shares’ end-of-week breather and short-term ceiling, Tesla stock remains an intriguing prospect for options traders.


Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, September 6.


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