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Tesla’s share price is back under heavy downside pressure below the $600.00 benchmark level, following a double whammy over bearish news for the world’s largest electric automobile maker on Wednesday.
Firstly, news that Tesla is not going to allow consumers to buy its cars in Bitcoin caused its stock to plunge. In March, Tesla announcement that it had massive Bitcoin holdings and was going to allow its electric cars to be purchased via the world’s largest digital asset.
The move was taken due to the company becoming increasingly worried about the environmental impacts that Bitcoin has, as mining just one Bitcoin of the top cryptocurrency uses up significant amount of power.
Tesla also said that they are in search of a cryptocurrency that uses less power than Bitcoin and is more environmentally friendly. It is therefore likely Tesla will deploy its capital into a new cryptocurrency this or next quarter.
Secondly, Tesla came under pressure alongside global stock markets after US inflation hit a decade high. Tesla is sensitive to inflation and supply shocks as its cars rely on rare earth minerals.
Considerable amounts of inflation could cause more price shocks for Tesla, due the fact that it could disrupt its supply chain. A shortage of chips is likely to hurt Tesla’s bottom line, as feared by many analysts.
Sticking with the theme of profits, Tesla announced that its profits were up to $438 million for the first three months of 2021. This was largely driven by profits from Bitcoin and sales of environmental credits.
Traders are therefore unsure about Tesla’s profits for this and next quarter, as supply shortages grip and its rotates away from Bitcoin. Therefore, Tesla could be a sell in the short-term.
Tesla Short-term Technical Analysis
According to the four-hour time frame Tesla’s stock price has staged a bearish breakout from a rising price channel pattern and has now fallen under the $600.00 support level after breaching the bottom of pattern.
According to the overall size of this historically bearish price pattern, Tesla’s share price could fall towards the $400.00 to $350.00 price area over the short-term.
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Tesla Medium-term Technical Analysis
According to the daily time frame Tesla’s is still trading inside a large descending triangle pattern, although the price is edging closer to the bottom of the pattern, around $530.00.
According to the overall size of the pattern a huge decline towards the $300.00 area could take place if a bearish break under the triangle pattern. Bearish MACD price divergence is also warning of a coming decline towards the $330.00 price zone.
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