https://www.barrons.com/articles/tesla-stock-drop-might-be-a-buy-signal-51548177298
Tesla Stock's 13% Drop Might Have Been a Buy Signal, Technician Says
Ben Levisohn
Jan. 22, 2019 12:16 pm ET
Photograph by Scott Olson/Getty Images
Tesla stock tumbled 13% on Friday after the company announced that it would layoff 7% of its workforce. The announcement—and the drop—led to much hand-wringing about the future of the auto maker, but it may also have created a buy signal, one market technician says.
The back story. Tesla (TSLA) stock tanked on Friday after CEO Elon Musk announced the layoffs. It wasn't just the layoffs that spooked investors, but Musk's admission that Tesla's "products are still too expensive for most people," and that the company needs to get the price of its cars down to $35,000. That could keep the stock under pressure, argue Tesla bears.
Elon Musk unveiled the first mile-long tunnel in Hawthorne, Calif. The tech entrepreneur says the system, simply called "loop," is a first step toward developing a high-speed network underground to eliminate traffic congestion. Photo: Pool/Getty Images
The plot twist. A 13% drop is huge, but in a volatile stock like Tesla, it's far less meaningful than it would be in General Motors (GM) or Ford Motor (F). As we've noted before, Tesla stock remains rangebound despite big up and down moves. And Zev Spiro of Orips Research notes that the stock remains in a neutral trend as long as it holds support at $245 and resistance between $380 and $389.50.
Spiro, however, sees signs that Tesla could be preparing for a move higher. He notes that Tesla's chart is showing "a potential bullish complex continuation pattern [that] began in June 2017," one that would be triggered if it broke above resistance. Spiro notes that Friday's selloff occurred on high volume, and yet minor support at $295 to $300 still held. "A hold and bounce off this level would be positive," he writes.
Moving forward. Tesla stock had dipped 0.4% to $301.14 at 11:35 a.m. Tuesday, and continued to hold the $300 level mentioned above. "Aggressive portfolios may initiate starter positions at current levels," Spiro writes. Barron's readers, however, should approach Tesla stock with caution. With the stock still rangebound, we're not inclined to bet one way or the other just yet.
Write to Ben Levisohn at Ben.Levisohn@barrons.com
Tesla stock tumbled 13% on Friday after the company announced that it would layoff 7% of its workforce.