Tesla stock (TSLA) is currently in a precarious position as it approaches key support levels. Investors need to brace themselves for potential trading volatility ahead.
The stock’s chart resembles a mountain range, characterized by numerous steep slopes. After a recent ascent that brought shares close to $280 each, it seems that the stock is now descending from its peak.
One immediate concern is the possibility of the stock breaking below a steep uptrend line, as noted by CappThesis founder and market technician, Frank Cappelleri. Historical patterns indicate that similar trendline breaks have resulted in rapid downside action in the past.
Having surged from roughly $220 to $280 in no time, the shares now face the risk of dipping below $260. If this level is breached, Cappelleri’s charts suggest that $240 becomes a likely target.
Interestingly, the recent weakness in Tesla’s stock doesn’t appear to be directly related to the company itself. Instead, it seems to be a reflection of the broader market correction. John Roque, senior managing director and head of technical strategy at 22V Research, believes that Tesla is not likely to be immune to these market forces.
As investors brave this uncertain period, it becomes essential to consider how far the stock could potentially fall. Will Tamplin, an analyst at Fairlead Strategies, identifies $218 as a key support level for Tesla. This level marks the starting point of a recent rally that began in mid-August, serving as another important reference for investors to monitor closely.
The Volatility of Tesla Stock
This approach is particularly well-suited to Tesla, as the company’s shares often become oversold or overbought due to an abundance of positive or negative news impacting the stock price. It’s no surprise that Tesla generates fervent opinions from both investors and analysts.
For example, Cathie Wood of ARK Invest predicts that Tesla could reach an astonishing $2,000 per share in the coming years. Conversely, Gordon Johnson, an analyst at GLJ Research, believes that Tesla is only worth around $24 per share. Such vastly different valuations highlight the considerable divergence of opinion surrounding this particular stock.
To put things into perspective, the $1,900-plus difference between these two valuations is nearly eight times the current stock price of approximately $257 per share. This disparity represents an incredible $6 trillion in market capitalization. Few stocks generate such controversy and polarized views as Tesla.
Of course, not all investors seek to make short-term trading gains. Some choose to hold onto their shares and benefit from long-term appreciation.
On Thursday, Tesla stock experienced an 8% decline in trading, while the S&P 500 and Nasdaq Composite both saw smaller decreases of 0.9% and 1% respectively.
