To The Moon

The price action on Monday for the electric vehicle giant TSLA, Inc. has seen bearish momentum after reporting production and delivery numbers for the first quarter as well as price cuts across several of its models. Tesla is hoping to boost demand for its vehicles amid increased competition in the EV market as more legacy vehicle owners roll out electric versions of their well-known models.

Late last week, Tesla reduced prices in the U.S. across its EV lineup. That came a few days after Tesla reported record quarterly delivery on April 2. Tesla delivered 422,875 vehicles in the first quarter. Onthat same day, Kimbal Musk sold $20m worth of TSLA shares as posted too.

Took puts under 180 as posted on 7 April 🤑

Tesla has been busy in the last five months, particularly with revising the price tags on its electric vehicles. In that short time, the EV maker has cut prices, cut them again, raised them, reported record quarterly deliveries, and then once more cut prices.

Tesla stock investors ponder what the latest cuts mean for demand and profits for the EV leader.

Bernstein analyst Toni Sacconaghi wasn't surprised by the cuts, however, pointing out in a Monday report that despite CEO Elon Musk saying orders were twice as high as production capacity following early January price cuts around the globe, first-quarter deliveries lagged behind production, pushing up new-vehicle inventories for the fourth consecutive quarter.

"Make no mistake, the price cuts reflect Tesla's need to stimulate demand and are an explicit trade off of margins for volume," wrote Sacconaghi. "Additional price cuts in other geographies are likely." He sees more price cuts pressuring Tesla's automotive gross profit margins.

He models Tesla's first quarter 2023 automotive gross profit margins at about 20.5%. The Wall Street consensus is at about 21%. Tesla posted automotive gross-profit margins, excluding the benefit of any regulatory credits, of about 30% in the first quarter of 2022.

Shorted upon price trigger at open

13.5% profit under 6 mins 🥳

The bearish price action on last Thursday and Friday caused Tesla to negate an uptrend in which the stock had been trading since March 13. The move lower also saw Tesla fall under the 50-day simple moving average, which creates another area of resistance for the stock.

Bearish traders and investors want to see Tesla form a bearish reversal candlestick, such as a doji or shooting star candlestick, under that level for a possible entry into a short position. Bullish traders may want to wait for Tesla to retrace after its next bounce, hoping the stock printing a higher low indicates the potential downtrend will serve as a bear trap.

Tesla may have fallen through a rising channel pattern on the daily chart, which is bearish. For the pattern to be recognized, which could confirm a longer-term downtrend, traders will want to see Tesla continue to trade lower on higher-than-average volume on Monday and possibly Tuesday.

Price action looks weak

What Tesla stock has done coming into earnings, of course, matters too. Tesla shares are down 4% in early trading Monday. The S&P 500 and Nasdaq Composite are off 0.6% and 1.2%, respectively.

Including Monday, Tesla stock has dropped in five consecutive trading days since the company reported record first-quarter deliveries on Sunday, April 2. Shares have lost 14% over that span. However, shares are still up about 44% year to date.

⚠️ Trading Tips: Looking at calls above 187 towards 190.41 and 200.51 and puts below 180 towards 177.59 and 166.71 on Tuesday. 

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