(Bloomberg) — A rare period of calm in Tesla Inc. shares is coming to an end, as investors brace for three pivotal events over the next six weeks that could bring back the wild swings that often accompany the shares of the electric vehicle manufacturer.
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In less than a week, the Elon Musk-led company will report second-quarter delivery results, followed by earnings later in July and the unveiling of its self-driving vehicle — also known as a robotaxi — in early August. Options trading data shows investors are positioning for a move of about 15% in either direction through mid-August, according to data compiled by Citigroup Inc.
But strategists say stocks could see much more turmoil. “Tesla options are underestimating volatility in these three emerging catalysts,” Citi equity trading strategist Vishal Vivek said in a note to clients. These events have led to big stock moves in the past, including among Tesla suppliers and other EV manufacturers, Vivek said.
“Given how important Tesla’s deliveries have been in the past, how much the stock price moves based on earnings, and the potential for a new product line announcement on robotaxi day, the 15% move suggested between now and expiration seems like August 16 low,” he added in an interview.
Tesla shares have been trading in a fairly tight range since early May, after circling earlier this year. The stock remains below its 200-day moving average – a longer-term trend indicator that traders pay close attention to – but a sharp rise this week signals the potential for change.
That boosts optimism among some investors. “While the medium-term consolidation and downtrend for Tesla has remained intact since 2021, the short-term picture has improved significantly over the past two months,” said Mark Newton, global head of technical strategy at Fundstrat Global Advisors.
Analyst estimates for the company’s second-quarter shipments have fallen precipitously, and with them expectations for both earnings and revenue. Still, some argue that Tesla’s problems surrounding sales of its vehicles are well known, so barring a major miss, its shares could actually rise once the numbers come out.
Traders have taken an increasingly bullish stance on where Tesla’s stock might find itself by the end of the summer. Options traders have pushed up the price of calls expecting a 10% rally and expiring in two months relative to the cost of equivalent puts. That momentum signals a growing appetite to push the stock higher, coupled with a diminishing desire to hedge a plunge to the downside.
The real test for the stock, however, will be the unveiling of the company’s robotaxi in August.
As Musk tries to reposition Tesla as an artificial intelligence company, rather than just an EV maker, a lot depends on what happens in August. Tesla stock currently commands a hefty premium that towers above all other mega-cap tech stocks, even the market’s favorite AI player, Nvidia Corp.
That lofty valuation is backed by investor confidence in Musk’s ability to successfully transform Tesla into a dominant AI player. The unveiling of the robotaxi will be a crucial step in that direction.
Therefore, it is difficult to accurately predict how the push and pull of these catalysts will develop in the coming weeks. But technical strategists recommend keeping an eye on a few key levels to understand if the stock is breaking out in one direction or the other.
“On the upside, a rally above the $206 resistance, which is a convergence of the February high and the 200-day moving average, would mark a breakout and act as the next incremental positive for the stock’s trend,” said Ari Wald, head of technical analysis at Oppenheimer & Co. That would mark a 4.3% jump from Tesla’s Thursday closing price of $197.42.
On the other hand, any decline that takes the stock below its short-term trendline of the 50-day moving average will be notable. That would require an 11% decline from the stock’s last close.
While it’s difficult to predict what the coming weeks have in store for Tesla, “I can say with more certainty that these events are likely to end the recent period of relative calm in the stock price,” said Adam Sarhan, founder and CEO from 50 Park Investments. “Positive surprises can fuel a rally, while disappointments can lead to a sell-off.”
–With assistance from Carly Wanna.
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