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