Why Tesla Stock Is In A Bear Market?

Tesla Video 23.02.21.

Tesla Shares Move Lower Amid Tech Sell-Off

Shares of Tesla declined below the $700 level and tested the support at $620 before rebounding back to the $700 level amid sell-off in the tech space.

In January, Tesla tested the $900 level so the stock lost more than 20% of value in about one month which means that it has entered into a bear market.

Concerns about valuation of high-flying tech stocks were the main catalyst behind the recent sell-off in Tesla shares. These concerns were triggered by the recent increase in Treasury yields which highlighted rising inflation expectations.

In addition, it looks like investors continued to move out of tech stocks in order to increase their bets on cyclical stocks which tend to perform well in the inflationary environment.

The recent sell-off in Bitcoin put additional pressure on Tesla shares as the company invested $1.5 billion in the cryptocurrency. While Tesla’s position in Bitcoin is not significant enough to trigger huge moves in its market capitalization, the company’s share price dynamics are very dependent on market mood towards riskier assets so they may be sensitive to big moves of Bitcoin.

What’s Next For Tesla?

Tesla stock has quickly managed to rebound from lows near the $620 level which indicates that many traders were waiting for a material pullback in the company’s stock and used the recent opportunity to enter into new positions.

While there are several valid reasons for concern which include increased competition, potential cost inflation and rich valuation, Tesla shares will likely remain dependent on market sentiment rather than on the fundamental evaluation of the company’s perspectives in the near term.

The recent trading action indicated that there is strong demand for Tesla shares at lower levels so the stock will likely need additional downside catalysts to continue the current downside move. In this light, the main risk for Tesla stock right now is the continuation of the sell-off in the U.S. government bond market which pushes bond yields higher and puts pressure on riskier assets like high-flying tech stocks.

For a look at all of today’s economic events, check out our economic calendar.