Tesla
Something's going on with Tesla (TSLA) shares today, as the stock is more than 3% lower, and the options market has been getting more active.
Shares rallied more than 40% from their April lows after the company reported earnings on April 23.
The earnings results didn’t cause the last 18% move higher, but instead, it was Elon Musk’s suggestion that we may see a more economically priced model from the EV manufacturer as early as late 2024.
Since then, we’ve seen a flurry of headlines from the company that have investors on edge again. We talked about this potential on April 24 as the rally appeared to be based once again on hope, not true fundamentals.
Well, as I said in that report, prices don’t lie, and Tesla’s prices are heading lower again.
The stock is approaching its 50-day moving average, which remains in a bearish trend. In addition, the stock’s faster-moving 20-day moving average is still below that 50-day, fortifying the short-term bearish trend.
Options traders are starting to get edgy as the options market has seen an increase in activity on Tesla shares over the last week. This is significant because the options market is where large traders and institutions speculate on stocks.
Watch closely for any sign of support for Tesla stock at $170. Failure to see buyers step in will trigger a volatile move back to $140, nearly 20% lower than today’s price.
Marathon Digital
Marathon Digital Holdings (MARA) is facing a tough technical obstacle.
The cryptocurrency mining company has seen a lot of volatility in a tightening range over the last three weeks partly due to Bitcoin’s volatility. The two are highly correlated for obvious reasons.
Marathon Digital shares recently rallied above their 200-day moving average, but the stock is getting stopped short at its bearish 50-day moving average.
The company’s last earnings report – issued on February 28 – showed strong revenue from operations that resulted in an earnings per share miss. That, along with the company’s lackluster outlook, has left the stock to be guided by its bearish technical situation.
News that Marathon Digital was being added to the small-cap S&P 600 Index on May 3 served to increase short-term buyers. Three days later, management announced a corporate organization to align itself with more growth opportunities. That move is an attempt to curb shrinking year-over-year revenue results.
Traders are still fading the company’s last 10% rally as the stock faces overhead technical resistance. Watch for any move lower to threaten the $15 level, which would increase selling to a target price of $13.40.
Disney
Disney (DIS) shares are trading lower by 9% ahead of the close. The company’s earnings, while showing some positive signs, failed to provide the vision that was needed to avoid a return to $100 soon.
Earnings for the quarter were better than expected as Disney reported earnings per share of $1.21, $0.11 better than what investors were expecting. Revenue was light – but not by much – and showed growth of 1.2% year-over-year. So, from the numbers perspective, things could have been worse.
The problem with the report is that investors needed to hear a strong outlook, which didn’t happen.
The company’s outlook for the third quarter included a softening of Disney’s streaming, or DTC business, as well as demand for domestic theme parks. As a result of the soft outlook for these businesses, Disney’s guidance was relatively in line with Wall Street’s analysts.
The problem here was that the stock had rallied 6% in the three days leading up to the earnings results. That style of rally is a clear “buy the rumor” rally that suggests investors are looking for a great, not good, earnings report.
They didn’t get it.
Two additional notes to take from the report…
- Disney’s continued struggle in the DTC – which includes Disney+ - puts Netflix in a better light for investors looking for growth in the streaming space. We’ll talk about that tomorrow.
- Disney commented that it's starting to see some evidence that travel demand is moderating from peak post-COVID levels. The “get out there” trade looks to have peaked. We’ll talk about that, too.
Shares are trading just above $105 with a short-term target of $100. Failed support at $100 will result in Disney trading to $95, at which point the stock would be trading back in a long-term bear market trend.
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.