Tesla Falls Amid California Factory Probe
Comment of the Day

November 19 2013

Commentary by Eoin Treacy

Tesla Falls Amid California Factory Probe

This article by Alan Ohnsman for Bloomberg may be of interest to subscribers. Here is a section

The shares are performing poorly because there is a perceived lack of near-term catalysts and so the stock is giving up momentum, said Andrea James, an equity analyst at Dougherty & Co. in Minneapolis, who rates Tesla a buy. It's not really tied to any news event.

Eoin Treacy's view

Tesla has succeeded, where many car companies have failed, in producing an electric vehicle that is viewed as desirable and that people are willing to buy. However, that does not make the share immune from the laws of supply and demand.

At Fullermoney we have often said that mean reversion is the closest thing we get to a natural law of physics in the social science of markets. Tesla has fallen from a peak near $200 to test its 200-day MA and it will need to find support in this area if the medium-term bullish hypothesis is to remain credible. Once a support building phase begins, it is likely to be reasonably lengthy because confidence takes time to rebuild.

3-D printing is another sexy industry that holds incredible promise and is easy to get excited about. There has been a great deal of consolidation in the sector over the last few years so that today there are three main players. Both Stratasys and 3D Systems have accelerated higher, rising 48% and 63% respectively since mid October. Both closed well off their intraday peaks yesterday to finish unchanged and pulled back sharply today. This action suggests at least pause in the course of their respective uptrends and potentially signals the onset of mean reversion. The ExOne also pulled back sharply today but is not nearly as overextended as the above shares.

Back to top