Tesla Bulls Should Watch for This Level Amid Musk, Trump Drama
Shares of Elon Musk's EV firm could be in real trouble if they see this close.
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Is there truly any way to describe what happened on Thursday?
No, I’m not talking about the blistering Circle Internet Group CRCL IPO, where we saw shares price at $31, above the expected $27 to $28 range. Shortly after the open, Circle rocketed as high as $103.75 before settling down and closing up 168.5%.
Stablecoins are a huge market, currently leading the way for crypto adoption and usage. While CRCL holders were the big winners of the day, Coinbase COIN holders will keep an eye on the stock as COIN is a minority holder in CRCL. Even if the COIN’s price action didn’t reflect it, if CRCL continues to hold these levels, expect COIN’s price to benefit.
But, back to the real drama. Donald Trump versus Elon Musk. It’s this generation’s "MTV Celebrity Deathmatch." I won’t summarize the tweets. If you haven’t read them yet, you wouldn’t believe me if I told you. Just go read them.
The ugliest development from the feud thus far is Tesla’s TSLA chart. The stock dropped sharply after Trump insinuated that government subsidies for Musk’s companies could be eliminated. Shares, already red on the day, plummeted over 14% by the time the closing bell rang.
Tesla bulls find themselves in a tough spot. The stock lost its 21-day exponential moving average (EMA), and the 10-day EMA is poised to close below the 21-day EMA in the next day or two without a big rally.
If shares don’t rally and close above $295 by the end of Monday’s trading, bulls may be in real trouble here. Tesla finds itself back inside a wide trading range that lasted all of March and April and part of May. That long consolidation should serve as strong support, but I know there likely aren’t many recent buyers who can stomach a test of $220 from these levels.
I wouldn’t look to play long here. If we fall sharply on Friday, something in the neighborhood of $250, or slightly below, then I may look for a bounce trade over the weekend. Should we close over $300, I expect a new range of $290 to $330 to develop during June.
However, until I either see another large flush or sideways consolidation, I don’t have an interest in buying Thursday's falling knife.
At the time of publication, Byrne had no positions in any securities mentioned.
