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Tesla Stock Technicals

Some key technical indicators for Tesla Inc. stock (TSLA) after a drop of 21.1% on September 8, 2020.

TSLA had the third worst return in Russell 3000 on September 8, 2020, as shown below.

The above scan shows Russell 3000 stocks with a drop of 10% or more. Despite the drop, TSLA is still gaining 294.7% year-to-date while it is 33.7% below the all-time closing high.

Based on the available sample since IPO, the stock had its worst daily drop since IPO that exceeded six standard deviations, as shown in the chart below.

The -6 standard deviations band (of the available sample) is at 20.93% while the stock fell 21.06%. Note that the standard deviation of the sample is just a descriptive indicator and it is not used here to make any statistical inferences since the actual value is not know, it may not exist or it may be unbounded.

As a result of a large standard deviation of daily returns at around 3.53%, TSLA has been behaving more like a speculative cryptocurrency than a typical large cap stock.

The 21-bar standard deviation annualized for 252-days is at 119.1% and even below the year maximum at 151.5%. Note for comparison purposes that the same volatility measure for SPY is at 18.7%.  The 14-day ATR for TSLA is at 10.9% while for SPY is at 1.6%. As everyone knows by now, risks are high with TSLA.

Buy and holders since IPO have been in a 20% or larger drawdown about 41% of the time, as the chart below shows.

Stocks like TSLA that offer high potential but at high risk often receive a small allocation in diversified portfolios. Trading this stock will probably result in total loss of allocated capital due to high risk, i.e., risk of ruin is nearly certain.

It is also interesting that the bulk of the gains in TSLA have been accumulated overnight and regular trading hours have provided little in comparison to the stock rise this year, as shown in the chart below.

The red line is the overnight accumulation (close to open), the green line is the regular trading hours (RTH) accumulation (open to close) and the gray line is the accumulation of daily changes (close to close).

It may be seen from the above chart that by August 11 the contribution of RTH was negative (-$7.7) while the overnight had provided gains of $196.5; It was hard, or even impossible, to profit from trading the stock during RTH due to flattish performance. After August 11, RTH gains started increasing along with overnight gains until the latter got hit by the recent plunge.

TSLA offers a good story about products but in our opinion is not a suitable security for trading due to high risks.


Charting and backtesting program: Amibroker

Data provider: Norgate Data

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