Mind Medicine
What a ride it has been for Mind Medicine (MNMD) investors. We saw the stock shoot through the sky last week on news that the FDA had granted “Breakthrough Therapy Designation” to one of the company’s trial treatments, but then shares dropped 30% from their highs.
The pullback is considered healthy at this point for a few reasons.
First, it is incredibly common for a stock, any stock, that hits $10 to see selling back to $8. This is part of what I refer to as the market’s “muscle memory.” At the heart of the move is a psychological trigger that simply causes traders to take profits.
Second, shares of MNMD bounced from $7.50 price level, which is where the stock had “gapped” higher to on its initial surge. The pullback is what traders refer to as “filling the gap.” It is normal for new buyers to start buying the stock once the gap has been filled.
Watch for the stock to break back above $10, then continue to $12, a 35% move from this morning’s price.
Tesla
This is big. Wells Fargo joined the ranks of banks to downgrade Tesla (TSLA) this morning. The analyst pointed out that they see downside risk to volume as price cuts are having a diminishing impact. They also see headwinds from disappointing deliveries and more price cuts, which likely drive negative earnings-per-share (EPS) revisions.
This is something that we’ve been talking about here for months. Bottom line, Tesla is in trouble.
Shares of Tesla broke into a long-term bear market in January when the stock moved below its 20-month moving average. From there, they continued lower to $175. We’ve seen the stock consolidate for the last two weeks as it prepares to make its next move lower.
Today’s downgrade will add pressure to break that consolidation and begin the next negative momentum move to $150. Watch for any sign that the company is set to lower guidance as this will be the likely trigger behind a 20% decline.
Dollar Tree
Dollar Tree (DLTR) shares are tanking by 15% this morning. The drop in price is due to the company’s latest earnings results. Revenue and EPS missed the mark as the retailer continues to struggle with a number of operational difficulties.
This sets DLTR aside from other discount retailers like Walmart (WMT), Burlington (BURL), and Target (TGT) that have shown strength returning to the segment.
Investors will be watching Dollar General (DG) shares closely tomorrow as they report results before the market open.
For now, DLTR shares should be considered a technical sell based on their shift below key market trendlines.
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About the Author
Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.