- Tesla stock looks to finally bottom, rising 5% on Friday.
- TSLA stock bottomed out near key support at $700.
- The equity market may rally with a benign week of data ahead.
Tesla (TSLA) stock finally caught a bid on Friday as it rallied to close up at $769. However, this still means the stock is comfortably down in 2022 as high growth names suffer from rising yields and reduced sentiment. TSLA broke our strong $700 support briefly last week, so this rally can truly be called a bear market rally.
Tesla Stock News
The weekend was filled with various hypotheses (yep, word of the day time!) about whether or not the deal for Twitter (TWTR) would go through. The consensus appears slightly in favor of it not going through, but it is a close-run thing. Most polls have the odds at around 55/45 in favor of the deal not going through. This means there is a large amount of uncertainty and a hefty margin of error. Twitter stock recovered quite a bit of ground on Friday to close down only -10% when it had been nearer -20% in the premarket. Investors took the view that something may yet come of the deal but perhaps at a lower price.
Our hypothesis is that the deal is unlikely to get done in the current environment. Things are changing rapidly for financial conditions. They have already deteriorated from when Elon Musk first announced his intention to take over Twitter. There is a lot of leverage involved in the deal and a lot of moving parts and numerous backers and investors. It only takes one or two to get nervous to scupper the whole deal. Things are already getting heated, as over the weekend Musk tweeted that Twitter legal called him to say he had violated the nondisclosure agreement (NDA).
As is by now common knowledge, Musk is on the hook for $1 billion if he walks away from the deal, but things could get more complicated if it gets legal. This is a serious headwind on both Tesla and Twitter stock in our view. According to a recent CNBC report that quoted Audit Analytics, Musk has approximately $90 billion of Tesla shares pledged for loans. That was as of April 28.
Tesla rallied on Friday due to hope that the deal may not go through, which would mean less TSLA stock being tied up as collateral. The market finally recovering after a horrible week also helped. Tesla remains a stock for loose financial conditions, and that is not where we are currently and where we are headed. The Chicago Financial Conditions Index below shows things tightening markedly, and yields will continue to spike if this trend persists. We feel it will, but this week should see a reset and relief rally. As mentioned things are moving exceptionally quickly in terms of macro factors right now. The current narrative with higher yields and tighter financial conditions is unlikely to waiver any time soon. The last CPI report has seen to that. Inflation is broadening out into all parts of the economy and away from any transitory sectors into so-called sticky areas.
Tesla Stock Forecast
For now it looks as if the bottom may be in. Friday saw a powerful and broad-based rally. 91% of stocks closed positively across the New York Stock Exchange. We would not be too surprised to see this rally stretch for another 10%, but then it will get too extended. This week is relatively benign in terms of economic releases or earnings, so it is purely down to positioning and investor sentiment. $945 remains the bearish pivot. Below that level Tesla remains firmly in its current downtrend and will break $700 cleanly. This will then see it down to $620 pretty quickly.
Tesla (TSLA) stock chart, daily
The author is short Tesla and Twitter.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD flirts with yearly top amid easing US-China trade tensions
AUD/USD holds steady near the YTD peak, with bulls awaiting a breakout above the top end of over a one-week-old trading range before placing fresh bets. Hopes that the US will start to announce some trade deals remain supportive of a positive risk tone, which, along with the underlying bearish sentiment surrounding the USD, continue to act as a tailwind for the pair.
USD/JPY upside potential seems limited ahead of BoJ meeting this week
USD/JPY ticks higher during the Asian session on Tuesday as a positive risk tone undermines safe-haven assets, though it lacks follow-through in the absence of any USD buying. Furthermore, the divergent BoJ-Fed policy expectations and trade-related uncertainties might continue to underpin the safe-haven JPY, warranting some caution for bulls.
Gold price remains confined in a familiar range held over the past week or so
Gold price struggles to capitalize on the overnight bounce from the vicinity of the $3,265-3,260 pivotal support and attracts some sellers during the Asian session on Tuesday. Signs of easing US-China trade tensions and hopes that the US will announce some trade deals remain supportive of a positive risk tone, undermining the safe-haven bullion.
Bitcoin: Will Trump’s 100-Day speech propel BTC above $100,000?
Bitcoin rebounds as high as $95,490 on Monday, as Trump’s 100-day speech dominates macro news. On-chain data shows BTC deposits on exchanges declined by $4 billion in the past week. Here’s how these insights could impact Bitcoin $100,000 breakout prospects in the near-term.
Week ahead: US GDP, inflation and jobs in focus amid tariff mess – BoJ meets
Barrage of US data to shed light on US economy as tariff war heats up. GDP, PCE inflation and nonfarm payrolls reports to headline the week. Bank of Japan to hold rates but may downgrade growth outlook. Eurozone and Australian CPI also on the agenda, Canadians go to the polls.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.