Stocks Mixed, Bitcoin ETF Shatters 2,000 Mark; Can Tesla Break Out?

An image of some coins and die Credit: Shutterstock photo

Stocks finished mixed Tuesday, but Tesla ( TSLA ) had a very important session. Shares in the electric vehicle firm gained more than 3% in heavy trading and continued Monday's rebound back above the key 50- and 200-day moving averages.

[ibd-display-video id=2700154 width=50 float=left autostart=true]A healthy growth stock tends to rise ahead of its 50-day moving average, which in turn is higher than the long-term 200-day moving average. The 200-day line covers roughly 10 months' worth of trading action. IBD daily charts show the 50-day moving average as a red line.

Tesla, a June 2010 new issue, is getting an order of 100 electric semi trucks from soda and snack maker PepsiCo ( PEP ). Watch to see if the innovative transport and energy storage firm can form the right side of a potential first-stage base.

Meanwhile, Bitcoin fever was unabated. The Bitcoin Investment Trust ( GBTC ) shot 22% ahead to 2,273, breaking the 2,000 barrier for the first time. Volume zoomed 155% above the 50-day average to 232,500 shares.

Bitcoin Investment Trust broke out of an extreme cup with handle that offered a 985.10 buy point, or 10 cents above the handle's intraday high of 985 seen on Nov. 3.The ETF has since gained more than 130% in the space of 14 sessions. At this point, Bitcoin Investment would have would have to fall more than 30% just to test the short-term 10-day moving average.

Judging by the near-vertical slope of the recent move, it would not be a surprise if Bitcoin Investment Trust, which seeks to mirror the price movement of the actual digital currency, took a break soon and succumbed to profit-taking. However, the strong start of Bitcoin-related derivatives trading in the Chicago Board Options Exchange serves as a positive factor for potential rising demand.

Gold futures, meanwhile, sank 0.4% to $1,241.70 a troy ounce on the Comex. Gold has now corrected 8% since hitting a high of $1,351 in early September.

The Nasdaq fell nearly 0.2% amid weakness in Chinese internet and select retail firms as well as software and semiconductor shares. Biotech, homebuilding, mobile home and RV and biotech stocks also fell 1% or more.

The S&P 500 advanced nearly 0.5%; the Dow Jones industrial average rose nearly 0.2% and the S&P SmallCap 600 eased nearly 0.2%. Volume ran higher on both exchanges, according to early data.

The Dow utility average dropped more than 1.9% to 748, marking its worst decline since a 1.9% slide on Feb. 1.

Tesla broke out of a sloppy cup with handle with a 370.10 buy point in October, but did not hit new highs and flopped.

The stock then undercut the low of that base, thus resetting the base count, a good thing. But Tesla will still need to prove to institutional investors that it will return to a path of profitability.

Long-term shareholders who bought when the company broke out in the spring of 2013 near 40 still hold a marvelous profit cushion and have no reason at all to sell. Even at the Nov. 2 low of 292.63, the Elon Musk-led company stood just 25% below a 389.61 all-time high.

Many great stocks fall that much in price and eventually form a solid base that spurs a breakout to fresh highs and profit opportunities for those who bought at the correct buy point.

A typical cup with handle , cup without handle , or double bottom will feature a drop from head to toe of 12% to as much as 33% or more. These base-building activities reflect profit-taking by a certain group of holders. But in the best stocks, such sell-offs become short term in nature.

Tesla is expected to post a 44% rise in revenue to $3.29 billion, but Wall Street analysts on consensus see the Palo Alto, Calif.-based company losing $3.08 a share vs. the 69 cents lost in the year-ago period.

For 2018, the Street sees a net loss of $3.79 a share despite a 69% jump in sales to $19.82 billion.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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