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Stock Market Could Be Tested Tomorrow, Plus Why Tesla May Be Cheap At Current Levels

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The stock market just continues to bounce around, and the trend is now distinctly lower. The market has been unable to hold its gains late in the day, in what is becoming a trend. The S&P 500 had been as high as 2,730 intraday, to finish the day flat at 2,703.

The index is following the upper orange trend line lower, with a series of lower highs, and lower lows. Let’s not make mountains out of molehills here, because the S&P 500 peaked at 2,748 on February 16, and now only sits 1.6 percent lower presently. But the closer we get to 2,691 the more critical it becomes for that the 2,691 support level to hold because the next stop is 2,633.

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Amazon

Amazon, as I have said has the markings of a tired stock. It again tried early in the day to break $1,500, and resistance again proved too strong, resulting in the stock retreating. The longer it takes for this stock to break out, the more likely it becomes the stock will be heading lower. I have said Amazon is likely to head lower, and once again the market came close to proving me wrong, but like yesterday, I live to fight another day.

Netflix

Netflix is in the same camp as Amazon, again failing to breakout. The bulls do not have the juice to get this stock higher presently.

Apple

Apple has hit a wall too, unable to climb like Netflix and Amazon.

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Tesla

Tesla must drive the short sellers nuts, and they must be pulling their hair out. They have to wonder what it will take for Tesla to go down? Tesla has had one bad piece of news after another since November, but the market just does not care. Now Electrek is reporting that the Model 3 is starting to go out to reservation holders that previously didn’t own a Tesla. The website is also saying that Model S & X are now in backlog because of rising demand.

Now if you are short the stock and all the bad news and delays have been priced into the market, and the news flow turns positive, what do you think will happen? The stock will rise.

The chart actually suggest that Tesla will continue to rise as well. In fact, the next couple of days will be critical to the stock with resistance at $348 and then $358, if those two levels get taken out, it is up to $386.

Now I don’t want to jinx myself and the other longs, but after failing at $386 the two earlier times, what do you think might happen on the third? It could be on its way to $400.

I spoke about this last week in the subscriber area, but Tesla is cheap by historical standards. Yes, you read that right. Cheap. Then again, keep in mind, this is coming from the guy that said Tesla could double this year to $600. The last time shares were this cheap was in February of 2016, March of 2017, and well, now, with the stock trading at 1.9 times 2019 sales estimates of $26.51 billion.

TSLA data by YCharts

Also what seems unusual, Wall Street has hardly adjusted its expectations for revenue in 2018 or 2019, despite the bad news flow. The chart below shows it, remember in January the year rolls over, so the green line below, represents 2019 estimates before the new year began. In November estimates were for $28.6 billion, today they sit $26.5 billion, a decline of only 7 percent.

TSLA data by YCharts

So either all the delays are not seen as having a significant impact on the revenue outlook, or the street never modeled in the Model 3 hype.

Night!

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Michael Kramer and the clients of Mott Capital own shares of TSLA and NFLX

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.

Tags: #sp500 #stocks #amazon #netflix #apple #tesla