Tesla stock has had a terrible start to 2024. It’s not unusual, but it’s severe enough that investors should be concerned. Tesla stock has dropped 12% this year. The S&P 500 and Nasdaq Composite have both been flat.
Investors may be selling for a variety of reasons other than Tesla. The 10-year Treasury note yield in the United States has risen slightly to just over 3.94% from just below that level. It’s a minor adjustment, but it represents higher-than-expected consumer inflation, which has damaged investor confidence that the Federal Reserve will decrease interest rates.
Lower interest rates can be beneficial to stock prices. They can also make cars more affordable to finance, allowing Tesla and others to sell more vehicles.
Then there’s the issue of taxes. In 2023, Tesla stock will have more than doubled. Investors may resist selling until the new year in order to postpone paying taxes until the following year’s tax filing. It’s the inverse consequence of selling tax losses in December.
This, like the decrease in the 10-year yield, is most likely a negligible influence. Tesla stock has increased in 11 of the 13 years it has been publicly traded. Six of the eleven times, the stock fell to begin the following year. That is greater than 50%, but it is hardly a significant trend.
However, this is not the worst start to a year. It’s only the fourth-worst start in franchise history. After increasing 7% in 2011, Tesla shares fell more than 20% in the first nine trading days of 2012.
Tesla’s Chinese pricing cuts, implemented late last week, are more significant than trading patterns and rates. reduced automobile prices imply reduced profit margins and earnings predictions from analysts. Furthermore, decreased pricing in China may fuel anticipation that prices for new Tesla vehicles will fall globally.
In addition, Hertz said earlier this week that it is selling one-third of its EV fleet. This fueled concerns that Americans aren’t ready for EVs. It’s probably more realistic to say that American auto rental companies aren’t ready for electric vehicles. It’s difficult to take a rental EV on a road trip if the driver is unfamiliar with electric vehicles. Wedbush analyst Dan Ives described the event as a “black eye” for Hertz rather than Tesla.
Hertz’s statement came after Cox Automotive released full-year sales figures for 2023. Last year, Americans purchased 1.2 million battery-electric vehicles, a 45% increase over the previous year.
Cathie Wood of ARK Invest has been purchasing Tesla stock while others have been selling. She purchased 94,733 Tesla shares in the ARK Innovation ETF on January 11 and 93,654 on January 12.
On Saturday, ARK did not respond to Barron’s request for comment. ARK is a Tesla bull, and the stock is the fund’s second-largest holding, after Coinbase, accounting for nearly 8% of the portfolio. Wood might be taking the bait.
Investors can use stock charts to determine when the selling will stop. Tesla breached “its 200-day moving average, which increases risk to the next move and more important support near $208,” according to Fairlead Strategies co-founder and market technician Katie Stockton. Stockton and other technical analysts look at stock charts and patterns to determine investor mood and where stocks will go in the short and medium term.
The 200-day moving average for Tesla stock is around $231 per share. On Thursday, it fell below that threshold for the first time since November. Stocks can have difficulty falling below or climbing above substantial moving averages. This is a technical analysis observation that might indicate if investors believe a stock has become too cheap or too expensive.
When a critical level is removed, it can indicate a shift in investor sentiment. In this case, investors are concerned about EV price, competition, and the path of interest rates.