Tesla And Twitter React In Opposing Directions After News

The US indices managed to close higher on Friday and pared more than 50% of losses suffered in the week. In general, since the beginning of this year, USA500.S and the tech-heavy USA100 have fallen nearly 20% and 15% respectively. It is worth noting that historically a 20% drop in stocks represents a “bear” market and may indicate pain for the real economy, or, in simple terms, a recession.

Musk’s acquisition of Twitter remained under the spotlight all week. On Friday, the Tesla CEO said that the  deal is on hold, which led to the Twitter share price gapping lower on open at $40.13 (over 12% below the close price of the previous day), while the Tesla share price gapped higher on open at $765.21 (over 5% above the close price of the previous day). However, as Musk reiterated that he is “still committed to the acquisition”, the former slightly recovered and closed at $40.71, while the latter remains above the high point of the previous day, at $768.09.

Changes are expected after Musk takes over Twitter. Besides weeding out bots and spam accounts, he has previously mentioned free speech and content moderation, the introduction of an edit button, open-source algorithms, eliminating scams, etc. Also, an approval from regulators is required (duration remains a mystery)  before Twitter Inc. turns into a private company (but may go public again in minimum three years?). Too many uncertainties lie ahead for the communication company which has over 200 million daily active users. The company reported net income $513 million y/y (or $0.61/share) in the first quarter ended March 31.

On the other hand, Tesla is also not in a good position. Supply chain woes persist up to the point that the company might stop taking orders on some vehicles in the near term. A flurry of lawsuits is another headwind to the company. In addition, recent crashes of cryptocurrencies have inevitably hurt Tesla, in which it is reported that all of the company’s gains on bitcoin have been wiped out.

Technical Overview:

Technically, #Tesla remains traded above levels seen in Aug’21, with nearest support at $696 and recent lows at $680, followed by $630 (a strong RtS level formed in June-July 2021). An ability to sustain bullish momentum may push the price higher towards testing the nearest resistance at $813, followed by $895 and the 100-Daily SMA. On the other hand, #Twitter hovers near support $41 and the 100-Daily SMA. An ability to hold above these levels suggests an opportunity towards testing the resistance at $47, $52 and the highest point seen this year at $54.54. Otherwise, if the asset remains pressured below the said support, next target level will be $35.50, then the lows seen this year at $31.17, followed by nearly the 2-year low at $28.15.

Click here to access our Economic Calendar

Larince Zhang 

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distribution.