Tesla’s $240 Billion Rally Set to Collide With a Bearish Signal


(Bloomberg) — Tesla Inc. shares snapped their record-setting 13-day winning streak Wednesday, as a hawkish stance from the Federal Reserve and market technicals took some steam off the rally.

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The lightning-quick run through Tuesday had added more than $240 billion to the electric-vehicle maker’s valuation since late May, pushing the stock deep into the so-called overbought territory — a technical signal that typically suggests a reversion is close.

As if on cue, Tesla shares closed down 0.7% at $256.79 Wednesday, ending their longest-ever run of gains.

The 14-day relative strength index shows shares of the Elon Musk-led company have not been this overbought since November 2021, at the height of a broader bull-market and when investor enthusiasm for all-things EV had reached a frenzy.

The latest rally came alongside another wider mania for artificial intelligence-related investments, which has combined with receding fears of a hard recession and a host of positive news from Tesla. That includes electric-charging pacts with legacy rivals General Motors Co. and Ford Motor Co., and all of its Model 3 sedans becoming eligible for the full US tax credit. A cooler inflation data on Tuesday, which sparked a relief rally in the markets, helped the stock further.

“We think the market wants to believe Tesla is an AI name first, an auto company second,” Morgan Stanley analyst Adam Jonas wrote in a note late on Tuesday. “While we did not expect this recent rally in the company’s shares, we suspect many investors may be again looking at ways to justify the valuation beyond the confines of a unit x price automotive/hardware model.”

–With assistance from Philip Sanders.

(Adds details in first paragraph, closing stock move in third, updates chart.)

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