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May 27, 2022, 7:29 a.m. EDT

Why the Tesla ‘death cross’ shouldn’t scare off investors

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By Tomi Kilgore

A bearish “death cross” pattern has appeared in Tesla Inc.’s stock chart on Thursday, but history suggests it isn’t as ominous as it sounds.

A death cross is when the widely-followed 50-day moving average, a short-term trend tracker, crosses below the closely watched 200-day moving average, which is viewed by many as a dividing line between longer-term uptrends and downtrends.

Many technicians believe that cross marks the spot where a shorter-term pullback morphs into a longer-term downtrend.

Keep in mind that death cross patterns aren’t always good market-timing tools, as they are well telegraphed, but they can help put a stock’s recent performance in historical perspective.

Tesla’s stock /zigman2/quotes/203558040/composite TSLA -0.57% rallied 7.4% to $707.73 on Thursday, and has bounced 12.7% in two days. At Tuesday’s 11-month closing low of $628.16, the stock had plummeted 49.9% since closing at a record $1,229.91 on Nov. 4, 2021.

The electric vehicle maker’s stock has been hurt by supply chain issues and COVID-19-related lockdowns in China , as well as concerns that Chief Executive Elon Musk may be distracted , and could selloff some of his holdings as a result of his buyout deal for Twitter Inc. /zigman2/quotes/203180645/composite TWTR -0.44%

That selloff has been sharp enough and has lasted long enough for the 50-day moving average to fall to $911.89 on Thursday from $914.40 on Wednesday, according to FactSet, to cross below the 200-day moving average, which ticked up to $912.58 from $912.55.

The last death cross appeared on July 9, 2021. The stock closed that day at $656.95, and has gained 7.7% since then. That last death cross had appeared about seven weeks after it hit its final low, after a 36.2%, five-month tumble.

Also read : Opinion: The Dow, S&P 500 and Nasdaq have now suffered a ‘death cross’ — here’s why this could resurrect them .

Thursday’s death cross is the 10th in 10 years, while the stock has skyrocketed about 119-fold over that time. In comparison, Apple Inc.’s /zigman2/quotes/202934861/composite AAPL +0.96% stock has produced three death crosses in 10 years and rallied about 7-fold over that time, and automaker General Motors Co. /zigman2/quotes/205226835/composite GM -3.40% has produced nine death crosses and has advanced 67% over the same time.

The S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.36% has produced five death crosses and has more than tripled in 10 years.

Claudia Assis contributed to this article .

/zigman2/quotes/203558040/composite
US : U.S.: Nasdaq
$ 695.20
-4.00 -0.57%
Volume: 23.89M
July 6, 2022 4:00p
P/E Ratio
94.33
Dividend Yield
N/A
Market Cap
$724.38 billion
Rev. per Employee
$626,347
loading...
/zigman2/quotes/203180645/composite
US : U.S.: NYSE
$ 38.21
-0.17 -0.44%
Volume: 4.87M
July 6, 2022 4:03p
P/E Ratio
167.44
Dividend Yield
N/A
Market Cap
$29.33 billion
Rev. per Employee
$698,993
loading...
/zigman2/quotes/202934861/composite
US : U.S.: Nasdaq
$ 142.92
+1.36 +0.96%
Volume: 73.97M
July 6, 2022 4:00p
P/E Ratio
23.23
Dividend Yield
0.64%
Market Cap
$2291.17 billion
Rev. per Employee
$2.51M
loading...
/zigman2/quotes/205226835/composite
US : U.S.: NYSE
$ 31.27
-1.10 -3.40%
Volume: 17.09M
July 6, 2022 4:00p
P/E Ratio
5.19
Dividend Yield
0.00%
Market Cap
$47.20 billion
Rev. per Employee
$831,267
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,845.08
+13.69 +0.36%
Volume: 2.20B
July 6, 2022 5:43p
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