Tesla Inc (NASDAQ: TSLA) down more than 45% year-to-date is on track for a death cross – a strong technical sell signal that suggests the downtrend is far from over yet.
Tesla stock is trading near its 52-week low
The stock will likely see its 50-day moving average slip below its 200-day moving average by the end of this week; a pattern more commonly referred to as the death cross.
The hit to TSLA this year is partially related to the ongoing risk-off in the overvalued tech stocks. Shares of the EV maker are now trading below $695 – the price at which Tesla secured a spot in the S&P 500 index in December 2020.
Bill Gates also cited “overvaluation” last month as he revealed a sizable short position in Tesla Inc. The tech-heavy Nasdaq Composite is down nearly 30% for the year, at present.
Musk’s Twitter deal has also been an overhang
CEO Elon Musk has pledged Tesla shares as collateral to buy Twitter Inc. His $44 billion deal to take over the social media company, therefore, has also been an overhang for TSLA in recent weeks. According to Bernstein analyst Toni Sacconaghi:
If $54 a share Twitter deal were to close today and subsequently Tesla had its stock price dropped to $350 – $400, Elon Musk could be forced into selling roughly 13 million Tesla shares.
A sharp decline in the stock price had billionaire Leo Koguan, one of the largest shareholders of Tesla, demand a $15 billion stock buyback last week. Tesla is currently trading at a PE multiple of 88.33.
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