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Asset Watch
Tuesday, September 3, 2024
Wall Street ended August on a high note, as the S&P 500 and NASDAQ 100 recorded sharp rallies to end the month. And while several risks remain – like central bank policy, election uncertainty, and recession fears – the bulls have clearly gained the upper hand.
But as Tesla struggles to maintain its upward momentum, what are some technical clues that could signal the next upswing?
William Blair slapped Tesla with an outperform rating on August 29, and its team of analysts said the need for grid stabilisation, the expansion of data centres, and the integration of renewable energy sources makes “Tesla Energy the most underappreciated component of the Tesla story.”
We “expect the narrative [to] shift toward the energy storage business in light of tempered EV expectations in the near term,” as Tesla owns an “Apple-esque ecosystem for the future of energy.”
With higher interest rates making it more expensive to finance automobiles, Tesla suffered from the demand deceleration that occurs alongside rate-hike cycles. However, with long-term Treasury yields down from their recent peaks and the Fed poised to cut rates in the months ahead, demand could resurface as cheaper leases enhance Tesla’s fundamental outlook.
When Tesla puts its pedal to the metal, the stock often holds above its 5-day moving average. The price action near the middle of the chart shows how the 5-day MA (the blue line) was a major momentum indicator, as the stock largely held above it during the sharp rally. Furthermore, similar outcomes have occurred during previous Tesla upswings.
The 10-day MA (the yellow line) has been resistance recently, and the stock closed below it on August 30. But, if Tesla can recoup the 10-day MA and the 5-day MA turns up, it could be a sign that the next rally is unfolding.
Though patience is prudent right now, when the 5 and 10-day MAs become rising support, Tesla tends to reward the optimists.
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