US stocks set for another red open; Tesla to fall further

Summary:

  • US markets set to begin lower

  • Head and shoulders forming on S&P500?

  • Tesla called to open lower after analyst downgrade

 

A recurring theme in recent weeks for US stock markets looks set to play out once more this afternoon with the benchmarks called to open firmly lower. On most occasions of late this has provided a nice buying opportunity on the opening bell with the US sessions often seeing a recovery after beginning in the red. Having said that, after a further escalation on the trade front with Google barring Huawei from using its operating system update there is a sense that banking on a swift recovery after any period of weakness is becoming an increasingly risky strategy.

There’s some sizable declines in US markets ahead of their cash session with the Nasdaq the worst hit and lower by around 1.5%. Source: xStation

 

Longer term the technical outlook for the S&P500 remains a little muddled with 2895 seen as potentially key resistance and 2800 possible support. This support could also be seen to be a neckline in a head and shoulders formation, and any break below there would pave the way for a deeper pullback. The recent rally at the back end of last week could be a possible right shoulder in this formation but unless the market breaks below the neckline then the outlook remains unclear.

A head and shoulders setup could be forming in the S&P500 with the neckline seen around the 2800 level. 2895 potential resistance. Source: xStation

 

While stocks in general have enjoyed a good 2019, it’s been a tough year so far for investors in Tesla with the market in a near constant decline. Price dropped sharply at the end of last week with Friday’s session alone seeing a near 8% decline and this afternoon the stock is called to begin lower by a further 4%. The recent weakness appears to be linked to a pretty damning overview from a Wedbush analyst who said they have “major concerns about the firm’s growth plan.  “With a code red situation at Tesla, Musk & Co. are expanding into insurance, robotaxis, and other sci-fi projects/endeavors when the company instead should be laser focused on shoring up core demand for Model 3 and simplifying its business model and expense structure in our opinion with headwinds abound,” Wedbush analyst Daniel Ives said in a note to investors.

 

Ives said Tesla’s ability to reach its end-of-the-year production forecast will be “a Herculean task.” The company forecast it will produce 360,000 to 400,000 vehicles by year-end. Ives estimates a “best case scenario” of 360,000 to 370,000 vehicles, although 340,000 to 355,000 is the more “likely path given the current tea leaves in the field around demand.”

Tesla shares are called to open lower once more this afternoon with the marker continuing to decline after breaching 245 support. The November 2016 low around 178 could now be a target for shorts. Source: xStation  

 

 

 

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