Chart Wars: What To Watch On Tesla, Twitter Stocks As Elon Musk Digs In

Tesla, Inc TSLA and Twitter, Inc TWTR stocks have responded wildly differently since April 4, when a SEC filing revealed Elon Musk had purchased a 9.1% stake in the social media company, which within just three weeks resulted in a pending acquisition.

Since the news of Musk’s stake in Twitter hit, Tesla has plunged about 19% whereas the micro-blogging app has soared almost 24% higher.

Tesla traders and investors may be concerned Musk will liquidate some of his personal stake in the EV company in order to fund his purchase of Twitter –an acquisition that will cost the world’s richest man $44 billion. The news has set Tesla into a heavy downtrend on both the daily and weekly charts, which looks set to send the stock lower still.

Twitter, on the other hand, should remain trading near to $54.20 per share, the price every shareholder will receive once the deal is formalized, if Musk follows through with his plan to take the company private. There is still regulatory hurdles Musk must get through before that happens, however, which may cause some continued volatility in Twitter’s stock.

It should be noted, however, that events affecting the general markets, negative or positive reactions to earnings prints and news headlines can quickly invalidate patterns and breakouts. As the saying goes, "the trend is your friend until it isn't" and any trader in a position should have a clear stop set in place and manage their risk versus reward.

Could Elon Musk Face A Margin Call On His Tesla Shares?

In The News: On Thursday before the market opened, Twitter reported adjusted earnings per share of 90 cents on revenues of $1.2 billion, which missed the consensus estimate of $1.22 billion. The social media company also reported a 15.9% increase in monetizable daily active users. The earnings miss caused Twitter’s stock to fall less than 1%.

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The Tesla Chart: Tesla reversed course into a downtrend on April 4, which has been confirmed on both the daily and weekly chart, making a longer-term bear cycle the most likely outcome. Tesla’s most recent lower high was printed on Wednesday at $918 and the most recent confirmed lower low was printed at the $875 mark the day prior.

• On Wednesday, Tesla attempted to regain support at the 200-day simple moving average (SMA), but failed and closed the session below the level. The 200-day SMA is a bellwether indicator that acts as a borderline between what is a bull versus a bear market and on Thursday, Tesla opened the session below the area and plummeted over 5% lower off the open.
• Eventually, Tesla will bounce up to form at least the next lower high in its downtrend and that may come soon because the stock’s relative strength index (RSI) is measuring in at about 33%. When a stock’s RSI falls toward or below the 30% level it becomes oversold, which can be a buy signal for technical traders.
• If Tesla closes the trading session near its low of day price, it will print a bearish Marubozu candlestick, which could indicate lower prices will come again on Friday, If the stock is able to bounce up intraday to close the session with a lower wick, it will print a hammer candlestick, which could indicate Thursday’s low-of-day marks the next lower low in the downtrend.
• Tesla has resistance above at $877.95 and $900.40 and support below at $821 and $780.79.

The Twitter Chart: Twitter was trading mostly sideways on Thursday, down about 10% from Musk’s purchase price. The slight consolidation downwards over the past three trading days combined with a 16% rise between April 20 and April 25, has settled the stock in a bull flag pattern on the daily chart.

• The measured move of the pattern if it’s recognized indicates Twitter could trade up toward the $55 level, but $54.20 will likely be the cap.
• Volume on Twitter’s stock has drastically decreased since news of the buy-out hit because many retail traders in both common shares and options have likely lost interest in trading a company that is headed private. Low volume makes a stock less volatile.
• Twitter has resistance above at $49.12 and $52.42 and support below at 44.40 and $41.01.

Photo: Courtesy of Heisenberg Media on Flickr