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Will the Tesla share price keep driving investors around the bend?

The electric carmaker continues to see its share price steadily decline, with the company performance likely to suffer as it plans to raise prices in China ahead of schedule.

Last week saw Tesla’s share price slide more than 6.5%, with the electric carmaker’s stock falling by more than 30% this year from $310.12 a share at the start of January to closing at $214.08 on Tuesday.

So consistent has Tesla’s performance being this year, that short-sellers of the stock are up by as much as $3 billion in 2019 – making it the most successful short position of the last nine months – according to New York-based financial analytics firm S3 Partners.

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Chinese tariffs for Tesla cars pricier

Short-sellers can expect to make further gains after Tesla plans to raise car prices in China this week, according to a report by Bloomberg.

The decision to raise vehicle prices in China is in reaction to the ongoing trade war between the world’s two largest economies which is applying weakening the dollar and leading to hikes in import tariffs on both countries’ exports.

The electric carmaker is being hurt more by the ongoing US-China trade war than its rivals due to it lacking local production, with import tariff hikes significantly increasing the cost of doing business.

Last week, officials in Beijing said they were prepared to raise tariffs on US made cars by as much as 50% in retaliation for President Donald Trump’s planned hike on Chinese exports.

Tesla: Technical Analysis

Tesla shares have been on the slide throughout August, as the gains seen throughout much of June and July are gradually eroded. However, that prior rally took us throughout both trendline and $259.37 resistance, signalling a strong possibility that we have bottomed out.

Looking at price action since that rally, we are trading within a bullish falling wedge pattern, pointing towards a potential impending rally. With price currently respecting the 61.8% Fibonacci retracement level, there is a possibility that the bulls could start to come into play from here.

Otherwise, look out for $198.62 as the next key support level of note. Alternately, a break below $177.11 would bring about a more bearish picture once again.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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