For a short period from the spring of 2020 until November of last year, when Tesla (TSLA) made massive gains, one of the most noticeable things about the stock was its resilience. Nothing moves in a straight line, and of course there were some bumps along the road, but the climb from a split-adjusted level just above $20 to over $400 was a remarkable thing. Perhaps the most remarkable thing about it was that TSLA showed such resistance to bad news along the way. There were some hiccups in the production growth schedule, some serious supply constraints, and the usual stories about self-driving Teslas in crashes and the like, and yet the stock still gained over 2000% in two and a half years.
The thing is, traders clearly didn’t care much about the problems, they saw beyond them to the long-term potential of Tesla to be the world leader in the massively growing EV market. That, however, changed at the end of last year, and even the diehard Teslarati seemed to start having doubts. Elon Musk bought Twitter, which many assumed would take up most of his time for a while, then declared a partisan political position that looked like it would alienate the majority of his environmentally concerned, left-leaning client base. The Fed were hiking rates even more aggressively than most had thought would happen, and a global recession started to look more likely than ever.
Those are all real issues, but were just the kind of things that pre-November 2021 TSLA would have no doubt just shrugged off. Instead, TSLA dropped from a November high of $414.50 to just over $100 by the end of 2022. People had started to pay attention to bad news. Then, at the start of this year, a bounce began. TSLA was oversold given its long-term potential, and some of the problems that had driven it lower seemed to be lessening. Most of all, though, traders have gradually returned to the mindset that no matter what life throws at Tesla and no matter what short-term negatives result, potential matters more.
Over the last few weeks, that cavalier attitude to bad news has become even more pronounced.
For example, China is an important market for TSLA, and a combination of spy balloons and the news that Covid-19 might potentially have originated in the Wuhan lab that was playing with viruses have seriously undermined U.S.-China relations. Meanwhile, the economies of Europe have started to show the impact of tighter monetary policy in their data. Then, this week, the fears that Musk may be distracted by Twitter and other ventures gained a lot more credence when the company’s investor day failed to deliver the clear plan for growth and new products that many had hoped for. Instead, we got generalizations about moving forward, and it looked for a few hours as if the stock would pay the price for that.
However, in true pre-drop TSLA style, none of that seems to really matter. The stock has bounced around over the last couple of weeks as the bad news has piled up but has followed each move down by a rapid bounce back.
Even yesterday, when TSLA reflected the disappointment from the investor day, traders stepped in and bought during the day, and we opened higher this morning. That is eerily reminiscent of the good old days, when traders quickly discounted any bad news and saw every dip as a buying opportunity.
Look, I’m not saying that another 2000% move up is on the cards, but when any stock can bounce back quickly after setbacks, it can beat the averages and show sustained longer-term strength. TSLA is back to being one of those stocks, and as much as the naysayers will be pointing out the negatives over the next few weeks and months, that attitude will keep moving it higher, regardless.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Martin Tillier
Martin Tillier spent years working in the Foreign Exchange market, which required an in-depth understanding of both the world’s markets and psychology and techniques of traders. In 2002, Martin left the markets, moved to the U.S., and opened a successful wine store, but the lure of the financial world proved too strong, leading Martin to join a major firm as financial advisor.
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