Tesla is staging an impressive recovery, reports Fiona Cincotta.
Tesla’s (TSLA) share price jumped 5.6% on Friday and was up another 6.5% late in Monday’s session.
This raises the question: What’s lifting Tesla? We have come up with a few reasons
1. Strong deliveries
Tesla reported that it delivered more vehicles in Q1 than expected, despite the Coronavirus setbacks. Tesla delivered 88,400 cars in Q1 2020, beating Wall Street’s expectations of 79,908 units. While Q1 saw a jump from Q1 2019 when jut 63,000 cars were delivered, the number was short of Q4 2019 when 112,00 when cars were delivered.
Investors have good reason to cheer these numbers given the upheaval that the firm has faced during the first three months on the year. Factories in China closed down for several weeks in January and February and its California and New York plants shut last week. Despite that disruption Tesla produced 102,672 cars in Q1, just 200 fewer that Q4 2019.
2. Coronavirus optimism
Monday the mood music in the markets was more upbeat after some signs over the weekend that the spread of Coronavirus could be slowing, and containment measures might be working (see “Slowing virus lifts stocks, below). Italy and Spain have both seen covid-19 cases fatalities fall. Germany and France are also seeing a flattening of the curve and the United States has seen rates slow over the weekend, although it’s unclear how sustained that trend will be.
Tesla has in no way been immune to the current Coronavirus market rout. The car industry as a whole has been hit hard by the lock downs across the globe and the tough economic conditions which are set to follow are likely to put consumers off high-value purchases. However, Tesla has proven to be more resilient than other car makers. That said, we will most likely need to see U.S. Coronavirus numbers persistently easing before we see any sustained move higher.
3. More EV’s?
After the extended period in lock down owing to a natural disaster, there is a good chance that consumers will come out the other side with changed habits and visions. A more environmentally friendly approach could be one such adjustment. This would be favorable for electric vehicles such as Tesla.
Levels to watch
Tesla traded 5.6% higher on Friday and was holding 6% gains late Monday afternoon, attempting to recoup losses from the previous week. The stock is trading above its 200-day simple moving average. It looks set to test its 100-day simple moving average. A move above there could see more bulls jump in (see chart below).
Immediate resistance can be seen at $515.50 (overnight high), $528.50 (100-day sma) and the March 26 high of $560. Support can be seen at $446, the April 2 low, $387, the 200-day sma and $350.50, the March 17 low. While those are awfully wide ranges, that has been Tesla.
Slowing Virus Lifts Stocks
Asian markers traded on the front foot overnight and European markets jump higher on the open, while safe havens come under pressure as the market mood turns positive.
Both Italy and Spain have reported a substantial slowdown in the number of new cases and deaths. France and Germany’s curves are also showing signs of flattening. Italy is even considering how to come out of lock down. This is a significant change in situation to where we were just two weeks ago.
The number of cases in Germany has reached more than 100k according to Wikipedia. The number of new cases rose at a slower pace.
While there may now light at the end of the Coronavirus tunnel, the data showing the economic impact of the restrictive measures taken to protect the public is still only at its initial stages. The full extent of the blow will take some time to seep through the economy.
German factory orders fell by less than forecast also supporting risk sentiment. Factory orders dropped -1.4% month on month in February, versus the -1.9% forecast and the 5.5% print a month earlier. The data will get worse over the coming months before it gets better, but Monday’s reading is a sign of relief for investors, particularly as the coronavirus outbreak shows signs of easing.
Levels to watch
The DAX has jumped 4% on Monday’s open, at 9920. It trades above its 50- and 100-period sma on the four-hour chart, a positive sign. Although it remains with the horizontal channel that it has traded within since March 25, a break above the upper bound of 10144 is needed for more bulls to jump in. Meanwhile a move below the lower bound of 9328 is needed for another step lower. (see chart).
Immediate resistance can be seen at 10144; support can be seen at 9700.
Fiona Cincotta is a Market Analyst for Currency Live
