Trading Nation

Tesla shares skid into a bear market amid a ‘make-or-break year’ for automaker, says market watcher


Trading Nation: Tesla enters bear market

Tesla shares skid into another bear market, and there's more pain to come as the automaker enters a critical phase in its history, says one market watcher.

"There's been tons of pressure on the name in what many considered to be a make-or-break year for the company," Michael Bapis, partner and managing director at the Bapis Group at HighTower Advisors, told CNBC's "Trading Nation" on Monday.

Tesla's stock in Tuesday trading was down nearly 21 percent from its 52-week high set on Sept. 18. That level puts its shares in bear market territory having dropped more than 20 percent from its 52-week highs.

"Analyst consensus is negative, short interest is at such a high level, and people have been hurt by that," Bapis said.

Tesla is the most shorted stock in the Nasdaq 100 at 22.8 percent of its float. The second-highest short is Sirius XM at 16 percent. The NDX has average short interest of 3.4 percent.

Goldman Sachs on Monday backed up its sell rating on the electric-car maker on forecasts that quarterly deliveries will fall short of estimates. Goldman analysts believe the company is tracking below Model S and Model X delivery guidance of around 100,000 units combined for the full year. The firm predicts a soft first quarter and said that efforts to sell down inventories hit its fourth quarter.

Its balance sheet is another concern to Goldman Sachs. For the full year, Goldman anticipates a loss of $9.23 a share, wider than the $6.15 loss expected by analysts surveyed by FactSet.

Bapis is also weary of difficulties facing the company's operations and finances.

"The fundamentals are breaking down," he said. "We would stay away from the name. We think it's priced more for the consumer than the investor and I would look out below."

The stock's charts also suggest trouble ahead to Ari Wald, head of technical analysis at Oppenheimer.

"The moderation in the trend is what's most troubling for us," Wald told "Trading Nation" on Monday. "You can see the stock's 200-day moving average starting to roll over. That is indeed a cautionary signal."

Its 200-day moving average was in an uptrend through the first three quarters of 2017, but has plateaued between $320 and $340 since November. Its share price broke below the support level in mid-March after wavering above and below that line in the year so far.

"The silver lining is that from a 30,000-foot view, big picture, the stock is still above its major breakout above $290," said Wald. "I think ultimately longer term it could work again but for now this is a no-touch."

Tesla first broke above $290 in September 2014 but did not return to above that level until April 2017. The shares have held above that point since then.

Monday's loss was Tesla's fifth straight day in the red, a streak not seen since September. It's on track for a 9.5 percent monthly drop, its worst since July.