What’s really driving Tesla’s incredible stock price surge? | Don’t ignore this chart!

Tesla’s (TSLA) first quarter results, reported after the market close on Tuesday, were lackluster and bordering on disastrous. However, on Wednesday morning, the stock surged 16%, widening the gap from the previous day’s closing price.

What happen? Well, Elon Musk framed the grim numbers with a compelling narrative that elevated the poor performance into a story of future growth. But do stories have enough base fuel to overcome FOMO?

From sinking ships to skyrockets

Here’s a brief description of what happened Tuesday: TSLA’s revenue fell 9% this quarter, vehicle production and deliveries fell 2% and 9%, respectively, and operating profit and adjusted EPS plummeted 56% and 47%. Operating cash flow decreased by 90%.

This figure alone would have sent TSLA’s stock price tumbling. So what happened? Musk essentially caused the price of TSLA to skyrocket with these two sentences: The company is accelerating construction of more affordable EVs based on current models.. Tesla EVs becoming cheaper means a surge in demand, and even growth.

TSLA Stock: A Macro Look

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In the TSLA weekly chart below, the stock has continued to decline since peaking in October 2021 (even considering the recovery attempt in early 2003). TSLA stock price is close to its 2023 low.

Chart 1. Weekly chart of TSLA. Despite an attempted recovery in early 2023, the long-term trend has been downward since 2021.Chart source: StockCharts.com. For educational purposes.

TSLA currently holds one of the worst StockCharts Technical Ranks (SCTR). The score is 2.2, a few steps away from 0. The leading EV manufacturer’s performance was in line with the industry ($DJUSAU) but significantly underperformed the S&P 500 by more than -45%.

Flying high from FOMO?

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Now take a look at the short-term price action on the TSLA daily chart (see below). The stock price hit a 52-week low and then suddenly showed an upward breakout pace.

Chart 2. Daily chart of TSLA. The breakthrough gap is optimistic, and so is TSLA’s narrative, but the rest of the technology is uncertain.Chart source: StockCharts.com. For educational purposes.

a groundbreaking gap The upward trend is characterized by powerful changes driven by strong psychology. They are rarely filled immediately.

TSLA’s 16% earnings gap is a strong bullish gesture, but note the strong rejection in the current candle. This indicates that the volume increasing the gap may not be enough to follow up in future sessions (this is a wait-and-see moment). The money flow index (MFI) is and Chaikin Money Flow (CMF) (the latter falling back below the zero line) shows a very slight difference that could be interpreted as bullish, and any surge after this point will face some of the technical headwinds above.

TSLA is trading below its 50-day simple moving average.However, if it crosses above it, look for an important resistance area in the $180-$205 range.

Bullish or bearish?

One-day spikes, no matter how impressive, do not define a trend. Likewise, a strong reversal of the underlying narrative does not signal a change in the story. As far as price targets are concerned, a survey of 30 analysts shows a wide range, with the lowest price being a shocking $23, the median price target being $185, and the highest price being above $310.

For now, everything depends on production commitments. As seasoned traders know, waiting for confirmation is usually a smart play. Technical indicators display key short-term and long-term levels, giving you a clearer view of the battlefield where all this drama will unfold.

disclaimer: This blog is written for educational purposes only and should not be construed as financial advice. You should not use any of our ideas and strategies without first evaluating your personal and financial situation or consulting with a financial professional.