Should Investors Take a Bite out of Tesla, Inc. (TSLA)?

Latest evolution in the price of Tesla, Inc. (NASDAQ:TSLA) stock has been one of the most talked about matter among the interested investors. It is widely believed that a stock’s future performance can best be predicted by analyzing prior trends and patterns in price. In the case of TSLA, the chart has some interesting things to say about where the stock might be headed in the future.

How has the stock performed recently?

Tesla, Inc. (NASDAQ:TSLA) has been trading in a bearish manner, based on the relative positions of the stock’s 20 and 200 day moving averages. In the last month, the price of TSLA has increased +0.64%. Shares are now up over the past year, outperforming the broad market by -100% and underperformed a peer group of similar companies by -12%. After the latest session, which saw the stock close at a price of $340.06, TSLA sits below its 52-week high.

Momentum indicators

Of course, these surface-level price movements don’t tell us much about the direction that TSLA may be headed in the future. In order to predict this, technical analysts look at momentum indicators, which measure the speed and magnitude of these price movements. The idea is that as momentum slows, it may signal the approach of key support or resistance levels and a reversal of recent trends. Two such indicators are the RSI (Relative Strength Index) and the Stochastic %k Oscillator, which fluctuate on a scale of 0 to 100. A reading above 70 indicates that a stock is overvalued, and a reading below 30 implies that it is undervalued. The 20-day RSI for TSLA is 57.61%, which suggests that the stock is not particularly expensive or cheap, and not predisposed to a reactive price movement based on this measure. The 20-day Stochastic %k measure, which sits at 76.67%, tells a different story, and suggests that TSLA currently trades in overbought territory.

What do the trading volumes reveal?

Price isn’t the only tool analysts use to forecast future performance. Volume patterns can also reveal some important insights. If, for instance, a stock’s volumes suddenly increase by a significant amount, it’s usually a sign that the level of conviction behind the trade is high. Investors may feel very strongly about the future direction of the stock in question. Tesla, Inc. (TSLA) average trading volume of 5,682,175 during the past month is 14.47% below its average volume over the past year, indicating that investors have been less active than usual in the stock in recent times.

What do the analysts think?

TSLA is currently overvalued by 8.61% relative to the average 1-year price target of $313.09 taken from a group of Wall Street Analysts. The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 3.00, which implies that analysts are generally neutral in their outlook for TSLA over the next year.

How risky is the stock?

When predicting the future performance for a stock, it’s also important to take into account risk. To do this, analysts often use a stock’s beta, which measures the stock’s volatility relative to the overall market.

Tesla, Inc. (NASDAQ:TSLA) has a beta of 0.91, compared to a beta of 1 for the market, which implies that the stock’s price movements are less extreme than the market as a whole. TSLA therefore has an below average level of market risk. During the past couple of weeks, TSLA average daily volatility was 33.24%, which is 0.63 percentage points lower than the average volatility over the past 100 days.

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