The Tesla (NASDAQ: TSLA) stock price is in trouble. The shares have crashed by over 40% from its highest level this year, bringing its market cap to more than $802 million. They have dropped by more than 4% in premarket trading, bringing Elon Musk’s net worth to about $227 billion. He has lost a whopping $42 billion this year.
Why is TSLA slumping?
There are several reasons why the Tesla stock price has been in a strong bearish trend in the past few months. First, the sell-off is part of the overall weakness in other equities considering that all indices like the S&P 500 and Nasdaq 100 have all plummeted by more than 10% this year.
Second, there are fears that the world will see a strong slowdown this year, which will hit most companies. In a letter to executives, Musk warned that he was feeling super bad about the economy. As a result, he warned that the company could fire about 10% of its workers soon.
Third, the Tesla stock price has fallen because of Musk’s distraction with his plan to acquire Twitter in a $4 billlion deal. Analysts believe that Musk could be distracted since he is already running three companies: Tesla, Boring Company, and SpaceX.
Fourth, the ongoing crisis in Ukraine has helped push the cost of EV materials much higher, with nickel soaring to multi-year highs. The cost of other things like wages and other raw materials. As a result, the company has been forced to hike prices.
Finally, the Tesla stock price has crashed because of valuation metrics. At its peak, it was valued at over $1 trillion, which was a bigger valuation than other automakers combined. Now, with its growth slowing, investors are assigning a different multiple on the stock. Besides, EVs have become a commodity, with other automakers like Toyota, VW, and GM unveiling their EV products.
Tesla stock price forecast
Turning to the daily chart, we see that the Tesla stock price has been in a strong bearish trend in the past few months. A closer look shows that it has formed a descending triple top pattern that is shown in black. In price action analysis, this pattern is usually extremely bearish.
At the same time, Tesla has formed a death cross, which happens when the 50-day and 200-day moving averages make a crossover. Therefore, I expect that the Tesla share price will likely have a bearish breakout to $500.
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