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

EV maker’s stock chart has averaged one death cross a year over the past 10 years

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 stockTSLA,+7.33%rallied 7.4% to $707.73 on Thursday, and has bounced 12.7% 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 bysupply chain issues and COVID-19-related lockdowns in China, as well as concerns thatChief Executive Elon Musk may be distracted, and could selloff some of his holdings as a result of his buyout deal for Twitter Inc.TWTR,+1.64%

That selloff has been sharp enough and has lasted long enough for the 50-day moving average to fall to $911.89 on Thursday from $914.40 on Wednesday, according to FactSet, to cross below the 200-day moving average, which ticked up to $912.58 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 7.7% since then. That last death cross had appeared about seven weeks after it hit its final low, after a 36.2%, five-month tumble.

Thursday’s death cross is the 10th in 10 years, while the stock has skyrocketed about 119-fold over that time. In comparison, Apple Inc.’sAAPL,+4.08%stock has produced three death crosses in 10 years and rallied about 7-fold over that time, and automaker General Motors Co.GM,+3.07%has produced nine death crosses and has advanced 67% over the same time.

The S&P 500 indexSPX,+2.47%has produced five death crosses and has more than tripled in 10 years.$Tesla Motors(TSLA)$