Tesla rallies on Cybertruck news despite China recall

Tesla (TSLA) stock gained over 1% in a combination of broad market recovery and follow-on from some strong delivery data last weekend.

Tesla however remains on watch for further losses as it has failed to break the previous high and remains in a medium-term downtrend from a technical perspective.

Elon Musk has certainly been busy with his stake in Twitter (TWTR) and this drew some retail traders back to Tesla which helped the stock. Also helping was data from Germany showing the electric vehicle adoption increasing with EVs now making new market share highs and enquires reaching record levels. The spike in oil and gas prices marked an increased EV shift from consumers. This is likely to continue.

The big story was the announcement of the imminent Tesla Cybertruck. This has long been on the wish list of consumers and Tesla investors and Elon Musk gave more details when he opened Tesla’s new giga-factory in Texas on Thursday. Musk said the Cybertruck will be made at the new Texas plant: “Cybertruck is coming next year and will be made in Texas,” Musk told a raucous crowd. “We are entering a new phase of Tesla’s future with six factories. We are scaling to extreme size.”

This is positive news and builds on the record deliveries that Tesla announced last weekend. Tesla delivered 310,000 vehicles in Q1 which kist missed analyst estimates but still showed continued growth with a jump of 68% on the same period last year. Scaling to extreme size appears to be on track. Tesla has opened a new giga-factory in Berlin and now Texas to meet demand. EV demand was growing throughout 2021 but 2022 has seen a marked acceleration in EV demand as oil prices spike to multi-year highs following the Russia Ukraine conflict.

Amid inflationary environment, Tesla has made repeated price hikes of late to combat rising input costs. Again on Thursday, we got news of another Model 3 price hike in the US. Companies with the power to pass on price rises to customers without hurting demand will outperform in the current environment. This is a tricky balancing act but Tesla is fortunate in that demand is likely to outstrip supply as EV adoption grows. It has a first-mover advantage in that it basically invented the EV market. Tesla did see some bad press also on Thursday but investors appeared unfazed by news of a recall in China.

Nothing has changed from a technical perspective. The chart remains in a classic downtrend with a series of lower lows and lower highs. The most recent lower high at $1152 is the pivot. Below there TSLA stock is bearish, above and it is time to rethink. The recent spike in markets and Tesla saw multiple overbought signals from the RSI and MFI (money flow index). The slower MACD is now also moving to crossover giving us a third bearish signal.