Tesla Stock Collapses But Looks Massively Oversold

by Clean Energy Intel

Image Source: Tesla Motors, with permission.

Having traded in a tight range for most of the day, Tesla Motors (TSLA) collapsed in the last 45 minutes of trading on Friday. The stock hit a low of 22.64 and closed at 22.79, down 19.3% from its previous close. Although it was reported to have bounced 7% in after hours trading, the price action remains a clear worry. More worryingly, the move took place on what became the third highest volume day of the last 52 weeks - with just over 5.5 million shares changing hands.

The stock indeed closed down 35% from the $35 high it saw twice in November and December of last year.

The move took place after Tesla confirmed that Chief engineer Peter Rawlinson and Nick Sampson, supervisor of vehicle and chassis engineering, had left the company.

Not much has been said publicly about the moves. However, in an emailed statement attributed to spokesman Ricardo Reyes, Tesla made the following comments to Investor's Business Daily -

"Having completed conceptual and design engineering work on Model S, Peter has decided to step away to tend to personal matters in the U.K.,..... Nick Sampson is no longer with Tesla. He had fully transitioned from any Model S activities by the time of his departure."

All of this would imply that the departure of these two players should have little effect on the launch of the Model S in the summer. However, the market may worry about this for a while longer- and that of course would be likely to be reflected in the price action.

Source: barchart

Nevertheless, from a big picture perspective, Tesla looks heavily oversold. As the chart above indicates, we are now in the rough $22 to $24 range that has seen good support in the past 52 week period. Moreover, Tesla has already announced the pricing and broad timely of it´s year´s launch of the model S - for more detail see here.

I already have a small position in Tesla, having recommended the stock on a few occasions last year. However, I intend to use the current weakness in the stock price to build a significant position ahead of what should in the end be a solid launch of the Model S.

Finally, you can read our bigger picture analysis on Tesla and the future of the electric car here.

Disclosure: I am long Tesla.

Clean Energy Intel is a free investment advisory service produced by a retired hedge fund strategist. You can read more at www.cleanenergyintel.com