Why TSLA stock is likely to break $843

  • Tesla stock lost 3% on Thursday after the CPI figure.
  • High growth is not the industry to be in in this hawkish environment.
  • Tesla will struggle with this macro context.

Tesla (TSLA) stock fell 3% on Thursday after the US CPI report. The inflation reading was higher than expected and showed that inflation was spreading to all sectors of the economy. Fed futures immediately priced nearly an 80% chance of a 50 basis point rate hike at the next Fed meeting in March. In Friday’s premarket, things stabilized somewhat as yields lost ground. The VIX has risen, however, as investors grow increasingly nervous about the outlook for stocks going forward.

Tesla Stock News

Tesla CEO Elon Musk didn’t help focus on the macro when he reportedly said “something has to give” on the US national debt. We also see news about Tesla looking to add a new design center in Beijing. Not too important on its own, but it underscores how important China is to many big tech companies.

Tesla obviously has its gigfactory in Shanghai, and China is the biggest market for electric vehicles in the world. China accounted for more than 50% of global electric vehicle sales in 2021. However, the macro backdrop will be the main driver here. Thursday’s CPI report was shocking, but so far yields have remained calm. Indeed, US 10-year yields are down slightly this morning but remain above the significant 2% level. This is the highest since the summer of 2019. Also note the inversion of the yield curve. The US 10Y – US 2Y yield curve is flattening and is currently at 43bps. Yield curve inversion has a 100% success rate in predicting US recessions dating back four decades. Again, this does not bode well for yield-sensitive technology and growth stocks.

Tesla Stock Forecast

This is a classic macro versus a technical divergence. The macro image looks strained. TSLA stock will struggle to move higher with such a strong macro picture, but technically the resistance at $945 looks like it could break. It may be unlikely, but worth pointing out just in case.

TSLA shares are stuck in a $945-$886 range channel and will break at some point. If it should be $886, which is assumed by FXStreet, then the 200-day moving average is next at $823. The most recent low at $792 is even more significant. If this is truly a continuation of the downtrend started in January, then a lower low should be set. Note how the volume has dropped. This is not a surprise as risk was irrelevant prior to yesterday’s CPI. The Relative Strength Index (RSI) is also low and below 50, so there is no direction here.

Tesla Chart (TSLA), Daily

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Karen J. Nelson