Tesla (TSLA) Expands Breakdown Amid Valuation Concerns


Shares of Tesla, Inc. (TSLA) extended their losses during Tuesday’s session as the market continues to reassess the company’s valuation amid rising real interest rates and falling prices for Bitcoin (BTCUSD).

Key takeaways

  • Tesla shares extended their losses during Tuesday’s session as the market reconsiders the stock’s valuation amid rising real interest rates and lower Bitcoin prices.
  • Wedbush Securities recently estimated that Tesla made around $ 1 billion in profit from its position in Bitcoin, effectively tying some of its fortunes to the cryptocurrency.
  • The stock broke from the 50-day moving average during Monday’s session and extended those losses on Tuesday to trend line support levels.

Tesla shares trade at a forward price-to-earnings ratio of more than 185 times compared to just 19 times for the automotive industry as a whole. With real interest rates on the rise, the market has shifted from growing stocks to value stocks, putting pressure on high valuations. The electric vehicle industry has also been grappling with disruptions from a global chip shortage.

There is also the Bitcoin angle. After buying $ 1.5 billion worth of Bitcoin, Tesla racked up an estimated profit of $ 1 billion earlier this month, effectively linking the valuation of the stock to the performance of the cryptocurrency. Bitcoin prices fell more than 8% during Tuesday’s session, which may have further contributed to the Tesla stock sell-off.

advice

TO real interest rate It is an interest rate that has been adjusted to eliminate the effects of inflation and to reflect the real cost of funds to the borrower and the real return to the lender or investor. The real interest rate reflects the rate of time preference of current assets over future assets.

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From a technical standpoint, Tesla shares broke from their 50-day moving average at $ 770.71 on Monday before falling further to key support levels on Tuesday. The Relative Strength Index (RSI) is approaching oversold levels with a reading of 30.50, while the Moving Average Convergence Divergence (MACD) remains in a strong downtrend. These indicators suggest that the stock could experience some consolidation in the short term, but the overall trend remains bearish.

Traders should be on the lookout for consolidation between the trend line support at around $ 650.00 and the 50-day moving average at $ 770.71 during the next few sessions. If the stock breaks out, traders could see a move towards the Fibonacci support at $ 592.02 or $ 508.28. If the stock breaks out, traders should be on the lookout for a retest of highs around $ 900.00.

The bottom line

Tesla shares extended their losses during Tuesday’s session as the market reassessed valuations amid rising real interest rates. Additionally, stocks could be hit by falling Bitcoin prices following its $ 1.5 billion investment, as well as a global shortage of chips.

The author does not hold any position in the stocks mentioned, except through passively managed index funds.

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