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Tesla Analysis: TSLA has more room to fall as institutions show bearish momentum

  • Goldman Sachs noted on Wednesday that Tesla is a favorite bearish position among hedge funds.
  • Likewise, investment funds as a whole maintain an underweight position in TSLA.
  • At the end of October, TSLA had nearly $17 billion in short interest.
  • TSLA stock has been in a downtrend on the daily chart since mid-July.

The actions of Tesla (TSLA) closed up 0.28% on Wednesday, outperforming the NASDAQ Composite, which fell 0.58%. However, the institutional bearish trend parallels the overall downward trend of the past four months and CEO Elon Musk’s recent Cybertruck event.

Goldman Sachs on Wednesday reported a study of securities being traded between mutual funds and hedge funds. Unfortunately for TSLA stock investors, both types of institutions are bearish on average on the leading electric vehicle (EV) company.

Tesla News

Goldman’s research report analyzed the similarities and divergences among the top S&P 500 securities held by hedge funds and mutual funds. Goldman says the overlap between the two categories of investment managers often results in superior returns.

Tesla stock was the only one of the Magnificent Seven (Apple, Amazon, Microsoft, Tesla, Nvidia, Meta Platforms and Alphabet) not to be included in the long overlap list. Instead, TSLA stock was listed as underweight by mutual funds and oversold by hedge funds.

Although the data is somewhat old, as of October 31, TSLA had portfolio securities worth $16.9 billion, that is, 3% of its free float. According to Goldman’s analysis, Tesla is the most bearish stock among hedge funds. Other notable bearish stocks are ExxonMobil (XOM), Intel (INTC) and RTX Corp. (RTX).

Tesla’s rise on Wednesday was quite restrained compared to other names like Rivian Automotive (RIVN) and Nio (NIO). Long-term Treasury yields fell on Wednesday, supporting risk appetite. Nio is benefiting from a report that it is planning to spin off its battery manufacturing business to become more profitable.

Stocks such as lithium rose on Wednesday as US regulation of the electric vehicle supply chain was less strict than expected. Most of the new rules concern protecting U.S. tax credits on electric vehicles from benefiting Chinese companies. Crude oil (WTI) also fell below $70 a barrel in the session.

Forecast on Tesla

Tesla stock has been stuck in a downtrend since peaking just below $300 on July 19. Last week, TSLA bounced lower again after reaching the upper line of the descending channel. That failure to break above the upper line resulted in three consecutive days of decline, also known as “three black crows.” This is usually a sign of a bearish turn.

The first confirmation, after possibly retesting the upper descending line, would be a break of the 9-day SMA, which is now trading just below $240. Another break of the 21-day SMA at $233 would lead to expectations of a sell-off to the $210 support. If TSLA stock continues its full channel rotation, then Tesla stock would decline to test the lower channel line at $180.

tsla

TSLA Daily Chart

Source: Fx Street

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