Tesla's struggling stock just saw a dreaded 'death cross' that could signal further losses
PATRICK PLEUL/POOL/AFP via Getty Images
- Tesla stock flashed a bearish "death cross" signal on Monday.
- The indicator was triggered by the stock's 50-day moving average falling below the 200-day.
- Shares have been volatile, down roughly 50% from December highs.
Major stock indexes flashed so-called "death cross" signals this week. On Tuesday, it was Tesla's turn.
Shares of the EV-maker met the definition of a death cross when their 50-day moving average ($288.76) crossed below the 200-day measure ($290.60). The formation has historically been a bearish indicator for the underlying asset.
Tesla stock has experienced incredible whiplash in recent months.
On the heels of President Trump's election, Tesla — which was seen as a beneficiary given CEO Elon Musk's close ties to the administration — soared nearly 100%.
But since its mid-December peak at nearly $500 per share, the stock has plunged about 50% as investors worried have mounted around slowing EV sales and growing protests against the brand.
This is the first time Tesla stock flashed a death cross since May 2022, the early days of a brutal bear market sell-off that was sparked by surging inflation and interest rates. Shares of Tesla went on to decline by as much as 54% before it found its bottom in January 2023.
It's important to note that the moving-average crossover strategy is a lagging indicator. Therefore, it can flash head fake signals, which occur when a stock quickly rebounds after a "death cross" and triggers a "golden cross" buy signal.
As Ari Wald, the head of technical analysis at Oppenheimer & Co., explained to BI last month: "While every major decline starts with a 'death cross' not every 'death cross' leads to a major decline."
Tesla isn't the only stock flashing a bearish death cross. Other notable death crosses hit bitcoin earlier this month and Nvidia in late March. The S&P 500 and Nasdaq 100 also flashed a death cross signal on Monday.