Investing 13-10-2022 09:11 8 Views

This chart analyst recommends ‘shorting’ Tesla stock

Tesla Inc (NASDAQ: TSLA) is already testing its 52-week low on Wednesday but Katie Stockton – Founder of Fairlead Strategies warns there’s further downside yet to unravel.

Stockton’s short call on Tesla stock

Speaking with CNBC’s Dominic Chu this morning, she named the largest U.S. manufacturer of electric vehicles her high conviction short.

We are recommending shorting Tesla Inc. I have to say that because we have a short-term breakdown. It’s a significant loss of relative strength that we’ve seen and, of course, the momentum has deteriorated.

Last week, Tesla reported less than expected deliveries for its fiscal third quarter citing several headwinds, including higher commodity prices and cash burn at the Texas and Berlin giga factories.

Nonetheless, her short call is in sharp contrast to Wall Street that has a consensus “overweight” rating on the Tesla stock.

Twitter deal remains an overhang

Investors’ concerns are also predicated on the $44 billion Twitter deal.

Earlier this month, CEO Elon Musk said he wanted to proceed with his takeover agreement with Twitter after all; and that too at the originally agreed upon $54.20 a share.

So far, he’s sold about $15 billion worth of Tesla stock to fund the deal. Even with debt and other investments, he still needs another $5.0 billion to close this transaction, which could see him selling more of Tesla shares. Stockton added:

If you look at the long-term picture of Tesla, you’ll see what looks like a topping formation. So, that holds a lot of risk. Maybe not in the very near-term but beyond that we think we’ll see some additional downside leadership from Tesla.

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