Tesla's double-top formation is facing off with bullish seasonality
Subscribers to Chart of the Week received this commentary on Sunday, November 30.
Double signals in one week are kind of a big deal around here. Senior Quantitative Analyst Rocky White always churns out a “Best Stocks to Target After Black Friday” piece before the holidays. Tesla Inc (NASDAQ:TSLA) is a historical outperformer the week after Thanksgiving, averaging a 1.5% return next week with a 60%-win rate over the last decade.
And if that’s not enough, Tesla has also outperformed in December, historically, over the last 10 years. The stock averages a monthly move of 4% and has finished the month positive in seven of the last 10 years. From its current perch at $426.91, a move of similar magnitude would erase TSLA’s quarterly deficit and fill the Nov. 13 bear gap.
The bullish signals are facing off with that double top formed in late October, but beneath its current perch by a considerable amount is $400, which stepped up as support already this quarter.
Another storyline to monitor is the overwhelmingly bearish sentiment; 25 of the 41 brokerages covering the equity maintain “hold” or worse ratings, while the consensus 12-month price target of $375.23 is a 12.3% discount to TSLA’s Friday perch.
Near-term options are actually attractively priced at the moment too. The 30-day at-the-money implied volatility right now is 46.5%, which lands in the 10th annual percentile, showing low volatility expectations around TSLA.
While this isn’t an outright “Buy Now” alarm, all those QA signals point to a Santa Claus rally maybe back up to that double top.
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Confession: On the other end of the snake spectrum is the spider-tailed viper, which uses a spider-like tail to lure birds. It’s nicknamed the “false-horned viper” because idiot birds will go for the wrong horn and get wrecked. So for these stocks, I’m looking at names that have done pretty well but for whatever quantitative reason, could be value traps that haven’t seen the floor yet.
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