Without a massive rally, Tesla Inc.’s stock chart will produce the first bearish “death cross” pattern in more than two years Friday, which some market technicians could see as a warning of further losses.
Electric Vehicle Industry Manager Warehouse TSLA,
rose 1.0% to $ 650.97 in afternoon trading on Thursday, reversing an earlier loss of as much as 3.8% at the low intraday of $ 620.46.
The 50-day moving average (DMA), which many Wall Street chart watchers use as a guide to the shorter-term trend, fell to $ 630.35 in recent trading and has fallen by an average of $ 1
Meanwhile, the 200-DMA, seen by many as a dividing line between the long-term up and down trend, rose to $ 629.58 and has risen by $ 1.10 a day over the past month.
It puts 50-DMA on track to cross below 200-DMA on Friday, which would snatch a 20-month streak where 50-DMA has been above 200-DMA.
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The point where 50-DMA crosses below 200-DMA is referred to by technical analysts as a “death cross,” which many believe marks the place where a shorter retreat develops into a long-term downward trend.
At current prices, the stock would have to rise 12.3% to close at $ 730.76 on Friday to hold 50-DMA above 200-DMA according to MarketWatch calculations of FactSet data.
Death crosses are not usually seen as good tools for market timing, as their appearance is telegraphed well in advance. For some, they only represent an acknowledgment that a stock’s withdrawal has lasted long enough and / or extended far enough to consider changing the narrative of the long-term outlook.
Tesla’s stock has not closed a record since January 26 and recently traded 26% below its record of $ 883.09. Meanwhile, other Nasdaq-listed mega-capitalization stocks such as Apple Inc. AAPL,
Microsoft Corp. MSFT,
Amazon.com Inc. AMZN,
and Alphabet Inc. GOOGL,
has all set new records this week, and Facebook Inc. FB,
shares closed with record highs last week
Tesla shares have run 7.7% year to date, while Nasdaq Composite Index COMP,
has gained 13.0% and the S&P 500 index SPX,
has advanced 15.0%.
And Tesla’s death cross could still warn of further losses.
The last Tesla death cross appeared on February 28, 2019, approximately two months after it reached a closure stop of several months, and after closing 15% below that peak. The stock fell another 44% before bottoming out three months later.
If that’s any consolation to Tesla investors, the stock card of some competing EV manufacturers has already produced death crosses: Nio Inc.’s NIO,
appeared on May 24 and Nikola Corps NKLA,
appeared on November 3, 2020.