PreMarket Prep Stock Of The Day: Tesla

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

Battery Day has come and gone for Tesla Inc TSLA and the Street isn't impressed. The build-up ahead of the reveal and price action following makes its the PreMarket Prep Stock Of The Day.

Post-Split Price Action: On most occasions, the announcement of a stock-split instigates a rally in an issue for a few different reasons. The primary reason being that a stock split conveys information to the market about the strength of a company moving forward. Also, the anticipation of increased demand when the shares become more affordable will prompt investors to purchase shares ahead of the split.

After the close on Aug. 11, 2020, Tesla announced a five-for-one stock split. The following day it rallied from $274.88 to $310.95 and that was just the start of the rally. Over the next 13 sessions, it rallied all the way to $463.70 and its pre-split adjusted price was $442.68.

What Didn't Happen After The Split: What usually happens immediately after a split is that an issue retreats shortly thereafter. In fact, data suggests that the days and weeks following a stock split, a majority of the issues are actually lower price than the price of an issue the day preceding the split.

In the case of Tesla, its split-adjusted price was $442.68. In the two days following the split, it breached $500 on both days, making its all-time high on Sept. 1 at $502.49 and all-time closing high the day preceding day at $498.32.

Then Came The Tech Wreck: On Sept. 2, a big pullback in the market and tech stocks in particular commenced.

While Tesla was doing its pre- and post-splitting jamming of the short sellers, Apple Inc. AAPL was doing the exact same thing.

In the five days following the making of its all-time high, Tesla cascaded all the way to $329.88 and ended that session just off that level at $330.21 for a 34% retreat.

The Bounce: Within five days of reaching that depressed level, it rebounded all the way back to $461.94 and began to struggle. Interestingly, it only posted one close above the adjusted split price on that same day at $449.64.

Following that high, sellers began to wiggle out of the long or initiate shorts, resulting in a trio of highs in the $450 handle (Sept. 16 at $457.79, Sept. 18 at $451, Sept. 21 at $455.68).

No Charge From Battery Day: At that onset of Tuesday night's presentation, the issue got a jolt in after-hours trading to a familiar area, briefly reaching $448, and then it was lights out. The issue declined in after-hours trading as low as $391.51 and ended the night session at $395.08.

Over the last few shows, the author of this article has noted the major resistance forming at the $450-$460 area and noted until that level was breached, the issue would be under selling pressure.

Today's Action: In a choppy session, the issue has been unable to breach the pre-market low, finding buyers at $393.88. Nor has it been able to reach the bottom of Tuesday’s range ($417.60), only reaching $412.15 and has fallen back under $400 as of 11 a.m. EST. If the decline continues, the next daily support level comes in at its Sept. 14 low ($373.30).

The full discussion on the issue from today's show can be found here: