Tesla shares: is the rally over?

The rally took the shares to the trillion dollar level, prompting some analysts to question its valuation and downgrade the stock. IGTV’s Jeremy Naylor takes a look at levels to watch out for as the MACD turns over.

(Video Transcript)

Tesla shares rally

So it seems that the stunning rally in Tesla shares may finally be over. Certainly for the time being, at least, the rally took the shares to the trillion-dollar level, prompting some analysts to question the valuation and coming through with a downgrade in the stock, which is what we saw yesterday coming through on the Tesla stock from Goldman Sachs.

Share price chart

I want to show you the share price chart because we've seen some relatively hefty candles on the way down. This blue box represents the move that we've seen since the beginning of the year. In fact, the year started negatively, but we've been up 127% since the very first trade in 2023, up to the recent highs that we've seen in the stock, taking us up to those highs on the 21st of June. Since then, there's been a little bit of air taken out of the tyres of Tesla stock.

Yesterday, Goldman Sachs cut the hold equivalent rating, joining Morgan Stanley and Barclays, which downgraded the stock last week. Brokerages, however, have said that they will raise their price targets to reflect the momentum in Tesla shares. But all those price targets are below where we are.

The MACD

I wanted to show you this because I think there are a couple of interesting things happening here. We've got this coming together of all these moving averages: the 50, 100, and 200-period moving averages; the 50 is now going above the 200-period moving average. There's this death cross that we've seen in this stock.

And that coincides as well with what we've got here down to the bottom with the MACD, the moving average convergence divergence indicator, something that I follow a lot of. When you get this passing in this direction, this is on the way down, obviously with the blue line coming in now down below the red dotted line, which gives us a little bit of a red histogram down here.

When you see that crossover happen, look what happens. The stock you see declines every time it happens; declines come through it every time. This is always the case.

So the big question is: how much further down can Tesla stock go? Certainly, we've seen a tremendous rally this year. As I said, it has more than doubled in stock since the beginning of 2023.

And people think it's time to sell stock. That's what they're doing at the moment. 240, 77. This is an all-session stock, like 9:00 this morning on the platform.