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Market Extra: Why the Tesla ‘death cross’ shouldn’t scare off investors

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A bearish “death cross” pattern has appeared in Tesla Inc.’s stock chart on Thursday, but history suggests it isn’t as ominous as it sounds.

A death cross is when the widely-followed 50-day moving average, a short-term trend tracker, crosses below the closely watched 200-day moving average, which is viewed by many as a dividing line between longer-term uptrends and downtrends.

Many technicians believe that cross marks the spot where a shorter-term pullback morphs into a longer-term downtrend.

Keep in mind that death cross patterns aren’t always good market-timing tools, as they are well telegraphed, but they can help put a stock’s recent performance in historical perspective.

Tesla’s stock
TSLA,
+4.47%

surged 3.9% in morning trading Thursday, and has bounced 9.0% in two days. At Tuesday’s 11-month closing low of $628.16, the stock had plummeted 49.9% since closing at a record $1,229.91 on Nov. 4, 2021.

The electric vehicle maker’s stock has been hurt by supply chain issues and COVID-19-related lockdowns in China, as well as concerns that Chief Executive Elon Musk may be distracted, and could selloff some of his holdings as a result of his buyout deal for Twitter Inc.
TWTR,
+5.41%

That selloff has been sharp enough and has lasted long enough for the 50-day moving average to fall to $910.78 on Thursday from $914.40 on Wednesday, according to FactSet, to cross below the 200-day moving average, which slipped to $912.30 from $912.55.

FactSet, MarketWatch

The last death cross appeared on July 9, 2021. The stock closed that day at $656.95, and has gained 4.3% since then. That last death cross had appeared about seven weeks after it hit its final low, after a 36.2%, five-month tumble.

Also read: Opinion: The Dow, S&P 500 and Nasdaq have now suffered a ‘death cross’ — here’s why this could resurrect them.

Thursday’s death cross is the 10th in 10 years, while the stock has skyrocketed about 115-fold over that time. In comparison, Apple Inc.’s
AAPL,
+0.73%

stock has produced three death crosses in 10 years and rallied about 7-fold over that time, and automaker General Motors Co.
GM,
+4.02%

has produced nine death crosses and has advanced 67% over the same time.

The S&P 500 index
SPX,
+1.48%

has produced five death crosses and has more than tripled in 10 years.

Claudia Assis contributed to this article.

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