After four consecutive weeks of massive gains, the Tesla stock price is once again one of the main topics among investors and retail traders. Due to elevated volatility, there has been a wider engagement using not only physical stocks but also derivatives like options and CFDs.
Tesla surpassed the $1 trillion market capitalization and does not show any signs of abating, yet one should question whether current valuations are a good time to buy, or whether a corrective move is imminent due to overbought conditions. The bullish trend in Tesla had started at the end of 2019, which means long-term investments from this point forward are challenging.
Earnings, upgrades, and Hertz
The latest batch of Tesla earnings has been positive on the top and bottom lines. Improved gross margins of 30.5% and $13.76 billion in revenue during Q3 show that the electric car manufacturer continues to improve. Traders have been actively trading TSLA via InvestingCrypto and other online trading platforms, benefiting from a strong price directional bias and volatility.
Alt-text: Tesla car charging
Doubled by the encouraging earnings, Hertz recently announced plans to buy 100,000 Tesla cars, a move that pushed the stock price even higher. Analysts on Wall Street upgraded TSLA to levels above $1,000 and that added to the list of bullish signals.
Tesla stock reaches record levels
On November 5th, TSLA closed around $1,200, very close to its record highs, continuing the rally that gathered pace on October 26th, when the breakout above $900, the prior all-time high, occurred. Two years ago, this was one of the most heavily shorted stocks on the market, but as retail traders started to pile up and sellers were squeezed out, the price went parabolically higher, with still no major signs of weakening.
Alt-text: trading the Tesla stock
Critics point out that current valuations are extreme and Tesla won’t be able to remain at present levels for an extended period, as it is now valued more than most of its major competitors combined. Although electric cars are trending higher among consumers, experts at InvestingCrypto find it hard to believe that Tesla will manage to keep the same market share in the long run.
How should traders approach TSLA?
A good rule of thumb for traders is “buy low and sell high”, which is why current TSLA price levels should be a good reason to remain patient – especially as Elon Musk, the company’s founder and CEO, recently tweeted a question, asking his followers whether he should sell 10% of its stock holdings in order to pay more taxes.
It is yet to be seen whether this move can have a long-term impact on the stock price. Regardless, this isn’t the first time Musk tries to downplay the stock’s performance in a very gentle manner. A few months ago he said TSLA is overvalued, which led to a corrective move starting to unfold.
Long-term buyers should remain cautious and in order to get in at more attractive valuations, they might need to wait for the stock to pull back. The $900 area is a good support and as long as the price remains above it, the bullish sentiment will be in play.