It is no secret that CEO Elon Musk has interests other than Tesla, Inc. (NASDAQ:TSLA). He seems to like to use "X" to identify his new flames. Thus, we have "X formerly Twitter." Then there is his latest hot interest, xAI. News reports claim that he diverted Nvidia (NVDA) chips from TSLA to X and xAI. We know he sold TSLA stock to fund the Twitter purchase. Now, the board wants to give him $56 billion in stock options. Does this mean he will be able to sell more TSLA stock to fund his other interests?
Our thesis is that TSLA faces serious competition ahead and that Elon has too many other interests. He has already sold TSLA stock in the past to fund new interests. Typically, portfolio managers sell their losers to buy the new winners. Is this Elon's game plan? Has he already left TSLA in terms of his personal priorities? I think he is moving into AI full speed ahead and leaving the TSLA behind.
Luckily, as technicians, we don't have to know the answers to these questions. Our stock picking system, using both fundamentals and technicals, gives TSLA a Sell signal. You can see that Sell signal at the top of the chart shown below. Then you can look at all the technical signals on the chart and see that they are bearish, and the TSLA price trend is going down and underperforming the Index.
Once it broke below the 40-week moving average, portfolio managers stopped buying and started selling. They hate to own stocks that break below the long-term moving average. They hate to own stocks in downtrends. (See the red arrow downtrend that is drawn above the price on the chart below.) There are many factors causing this downtrend in TSLA price.
First and foremost, the Chinese cars are beating TSLA on price in the world market. We don't see that in this country because TSLA is protected with tariffs and government subsidies. However, those could end, especially if Elon says the wrong thing in an election year.
Next, buyers prefer hybrids to EVs, and that is a short-term problem for TSLA. Buyers don't see a charging station on every corner, but they do see plenty of gas stations to keep their hybrids going. The EV world has yet to set up as many charging stations as gas stations. The utilities have to come up with the power for crypto, AI, and EVs. No brownouts yet.
Finally, the auto industry is a very competitive business and TSLA is not set up to compete. It has a poor distributor network. All the auto companies have highly sophisticated marketing methods to drive buyers to the showrooms and salespeople. That leaves TSLA out in the cold as every auto company starts to eat TSLA's formerly exclusive lunch of being the largest manufacturer of EVs.
We like to do our due diligence on the chart signals below by using SA's analysts and Quant ratings. We think TSLA is a Sell as shown on the chart below, but we certainly want to read the analysts who have buys, and we aim to look at any good ratings for TSLA, then we make our decision and publish our article and our rating on TSLA.
SA shows a Hold rating for Wall St. analysts, SA analysts, and SA consensus Quant rating. This is understandable, and most agree with holding on to a former winner like TSLA in the hopes that it will come up with some innovation led by the genius Elon Musk. But Elon is giving every indication that his priorities are elsewhere, and he may need to sell more TSLA stock to raise cash.
The buy and hold investors will stay until Elon actually leaves, even though his priorities seem to be where he diverted the Nvidia chips to and away from TSLA. Buy and hold investors will ride TSLA to the bottom, when the bottom fishers come in to buy the bargain of the best EV company.
Meanwhile, the current bounce in TSLA is triggering our sell into strength signal. The bounce is a weak attempt to reach the red arrow downtrend, and I don't think the price will go that high. However, I don't guess about these things. When that blue vertical line is replaced by a red one, then I will know that the bounce is over. Price will then drop looking for a bottom, as happened after the last red line. We will post that red line signal when it happens so that you will know.
The SA Quant ratings are weak, except for the high Profitability rating, and I guess that is why the overall rating is a Hold and not a Sell. TSLA has become a stock with low ratings for Growth, Valuation, Momentum, and Revisions, which tells me that the price is going lower, just as the signals on the chart below indicate.
You can see that the famous Chaikin Money Flow (CMF) signal is in the red. The MACD shows the current bounce in price. However, Relative Strength, TSLA:$SPX, shows it underperforming the Index. Mutual Funds have to dump these stocks if they want to beat the Index. At the bottom of the chart, ADX signal shows the red line, Supply, greater than the green line, Demand. That Supply is holding prices in check. This is why the bounce looks weak.
Here is the weekly chart showing all the Sell Signals we have discussed above. You can find my live chart on Stock Charts.
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