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September 9, 2020

September 9, 2020

Tesla stock: Fundamental and technical analysisMikhail Hypov

At the beginning of summer I made two reviews of the Tesla stock that you can check out [here][1] and [here][2]. Actually, those analyses of the Tesla shares have been by biggest delusion ever. At that time, one Tesla share cost about 800 USD, and that seemed to be extremely expensive, based on fundamental analysis and indicators. Only three months have passed since then, but the stock itself and the market in general have changed in quality and structure. The previous analysis became irrelevant. So, in this article we are going to determine a new development scenario in the multi-time frame, from a few weeks to a few years.

The article covers the following subjects:

Fundamental analysis

Even if using the terms “Fundamental analysis” and “[Tesla][3] stock” in one sentence has become improper, we can’t fully ignore this stage. There’s no point in mentioning the company’s multipliers: they haven’t changed radically in the past three months. Despite the stock price’s latest correction, economic analysts still believe that Tesla is overhyped.

Elon Musk’s love for playing with private investors’ sentiment using his Twitter and shocking public speeches is quite famous. I wrote about that in my previous articles. My main mistake was an attempt to assess the company’s fundamental figures out of touch with the owner himself.  The latest events around the split cast light on Elon Musk’s plans. Now his moves don’t look like a charismatic billionaire’s awkward jokes. They are rather a considered strategy of a clever man. Musk’s genius isn’t about engineering, it’s about social sciences. He managed to link his personal brand to the Tesla company. According to Robintrack, Tesla is the 8th popular company among the Robinhood users.

Robinhood is the biggest stock exchange for private investors that counts more than 10 million users. It is believed that Tesla’s stock managed to soar during the pandemic and economic crisis because of its army of fanboy investors.

![LiteForex: Tesla forecast: Fundamental and technical analysis][4]

The chart above shows that the company’s cost grew 6 times from March to September. One of the biggest spikes was in the period from 12th August till 1st September. The stock’s price grew twice in less than one month! Let me remind you that Tesla’s split was announced exactly on 12th August.  Accidentally, another event occurred before that announcement. On 10th August, Robinhood closed access to the information on its users’ portfolio composition.  Obviously, the main goal of the company stock split was making it more accessible for private investors. Stock exchanges normally don’t allow investors to buy a share’s fraction. Since [Tesla][3]’s share price exceeded the level of 1,500 USD in summer, small investors simply couldn’t afford to buy Tesla.

However, the Apple Company’s 4:1 stock split prompted a solution.

![LiteForex: Tesla forecast: Fundamental and technical analysis][5]

The positive effect of Apple’s and Tesla’s splits on the stock price is shown in the chart above. Even if Apple’s stock reached the price of 130 USD, which is convenient to small investors, Tesla’s positive effect was two times bigger. The Tesla stock grew 84% on the split announcement before a split itself. Neither the company’s low profitability, nor its stock overboughtness or high price could prevent the stock from growing. It indicates a big number of speculators in Tesla, which can be much bigger than in Apple.

I don’t think Apple and Tesla conspired to split their stocks at almost the same time. Elon was asked about an eventual split on Twitter already on 30th June, and he replied it was “worth discussing at annual shareholders meeting”. The nearest meeting wasn’t scheduled before 22nd September, though. So, the stock split decision was a total surprise on 12th August.

![LiteForex: Tesla forecast: Fundamental and technical analysis][6]

Most probably, Elon had used Apple as a lightning rod. Having learnt about its plans, he decided not to miss out on the opportunity to pump up the stock price further. If he had taken such a decision at any other moment, he would have been accused of pumping the bubble. However, Musk’s actions don’t look so suspicious against Apple’s background. He’s simply following the marker leader. Interestingly, the split date in the two cases was the same - 31st August.![LiteForex: Tesla forecast: Fundamental and technical analysis][7]

Traders’ secret law says, “buy the rumour, sell the news”.

Obviously, the stock price will go down after the split. That was the main reason for Tesla stock’s fall, and not its not making it into the S&P 500. The shareholders simply wanted to fix profits by selling out the stocks, overheated on expectations.

The pool of Tesla biggest shareholders is headed by Elon Musk himself with a share of more than 18%. Apple’s stock became the most capitalized one in the US market after the split, but Elon failed to hide behind its fall. The chart above shows that Apple’s share price started falling on the same day with a 6-hour delay.

However, the mass media found another reason for the Tesla stock’s decline. They all started talking about the exclusion from the S&P500. Objectively, the news on Tesla’s possible inclusion in the index wasn’t spread as much as the news on the stock split. Many experts were sceptical about the inclusion because of the issues related to the company’s financial reports. Thus, the exclusion wasn’t supposed to affect the stock price, as those expectations weren’t inflated. So, in my opinion, Tesla’s stock fell once big players sold their shares and fixed profits amidst unprecedented growth.

Elon Musk’s idea is heating demand for the company’s stock for as long as possible using unexpected tweets and bright public shows.

It’s a harvest-time now.  After the split, Tesla’s stock doesn’t look so expensive, and hamsters will eagerly buy out cheap shares. If Robinhood hadn’t concealed the information on its clients’ investment interests, a growing demand for the stock combined with a price fall would be obvious. Robinhood itself explains its decision to hide this information with the intention to lower its clients’ speculative sentiment. The company representatives say they don’t know how Robintrack’s information will influence the investors, and they don’t want to expose them to additional risks. This statement doesn’t sound convincing as there are many independent analytics providers on the Internet. For example LiteForex, which publishes expert opinions, like the one you’re reading now, and provides access to technical analysis and data on the market sentiment.

![LiteForex: Tesla forecast: Fundamental and technical analysis][8]

There are screenshots from LiteForex’s [analytical blog][9] above. They show market sentiment and indicators’ recommendations for Tesla. This is open access information available to anyone without registration. Actually, every big respectable broker provides its clients with such analytical data. Robinhood itself provides a simplified version of this service, which by the way makes the Robin administration’s actions even more so absurd. Any trader will always find necessary information on the Internet if he or she needs to make a trading decision. I think the closure of the transparent analytical resource at Robintrack is nothing more but an attempt to conceal the situation where whales unload expensive Tesla shares on unprotected amateur investors.

![LiteForex: Tesla forecast: Fundamental and technical analysis][10]

The horizontal volume chart confirms that situation on the 15-minute time frame. There are no panic sales. Large quantities of stocks are unloaded within a short time (marked with red arrows). The green circle marks the core participants’ behaviour. They bought out those unloadings and then sold them step by step. It happened on 1st  and 2nd September. Then the market started slightly falling, and the panic developed.  The manipulators’ reaction is classic: now they’re buying out the panic sale. I marked that with green arrows. The big players are getting ready to upload new large stock volumes, prevent panics and give hope for a retracement.

Conclusion

Tesla’s cap exceeds the aggregate capitalisation of Toyota, Ford and Renault–Nissan–Mitsubishi. At the same time, Tesla’s production share is only 0.5%, while the aggregate one of  Toyota, Ford and Renault–Nissan–Mitsubishi is about 50%. Obviously, Tesla’s stock price is overvalued due to Elon Musk’s tactics. This man’s genius lies in the ability of calculating his steps in the long term, and not in his engineering skills. He understands well that Tesla can’t compare with the world’s giants. The green car wave has already begun, and the Tesla company rendered great services to its faster development tempo. Still, in spite of Tesla’s enormous growth, it can’t compete with the whole world.  Elon Musk found a smart way of skimming the cream off his position in the market of electric cars: he raised the stock price sky high. Thus, Musk can use the stock as a bank margin for drawing in money and make cash fast through direct market sales. Musk’s popularity helps him to attract the best engineers and programmers into his projects who are ready to work for less money and for the sake of the beautiful idea. In the long term, Elon Musk acts wisely, making the most of the unprofitable company and expanding business against the background of big and inflexible auto-giants. Musk’s main task was “booking” a place in the sun for Tesla, and he did that well. The growing competition among electric car producers, the scientific progress and economic crisis will do their work, and Tesla will take a back seat. We are probably observing the price peak that will never be reached again. Tesla is on the threshold of a big bearish correction. Technical analysis will help us understand how deep it will be and if the price will recover. Check out the “sequel” here later.  Subscribe to my blog at [LiteForex][11] and bookmark the article not to miss my updates!

Good luck and profits, everyone!

Yours,

Michael @Hypov

P.S. Did you like my article? Share it in social networks: it will be the best “thank you” :)

Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

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Price chart of TSLA in real time mode

![Tesla stock: Fundamental and technical analysis][14]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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  1. www.liteforex.com/blog/analysts-opinions/tesla-is-bitcoin-of-the-stock-market-part-1/
  2. www.liteforex.com/blog/analysts-opinions/tesla-bitcoin-in-the-stock-market-part-2/
  3. my.liteforex.com/trading/info?symbol=%23TSLA
  4. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.09.08/Tesla_1.jpg?w=30&s=dd9c549b658d69125799c93cde54d6e3
  5. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.09.08/Tesla_vs_Apple_2.jpg?w=30&s=91038d34007f8c30b5ead1490d914102
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  8. cdn.liteforex.com/cache/uploads/blog_post/hypov_09-09-2020.jpg?w=30&s=eab34d795833d027e9c5092d11b4f731
  9. my.liteforex.com/trading/analytics?symbol=%23TSLA
  10. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.09.08/Tesla_5.jpg?w=30&s=121eb3887271c8568e0e8717a0a67fdd
  11. liteforex.com/blog/?author=72
  12. my.liteforex.com/?category=analysts-opinions&slug=tesla-stock-fundamental-and-technical-analysis&openPopup=%2Fregistration%2Fpopup&utm_source=blog&utm_medium=article&utm_campaign=bonus
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  14. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.09.08/Tesla_logo.jpg?q=75&w=1000&s=b94b4379646ad62a9c77e832af32181b