Negative recommendation for two American favourites

Published 26 March 2021

Tesla and GameStop are trading favourites among many small investors. Price movements have caused major changes in the technical charts in the past few weeks. According to Investtech’s analyses, now is the time to sell.

Tesla, Inc. (TSLA.US) Close: 640.39 (+10.12), 25 Mar 2021

Tesla increased tenfold last year and the stock saw massive attention from both Tesla owners and small-time investors. In recent months, however, some of the optimism has vanished. Many existing investors have sold at lower prices to secure profit, and new buyers are less aggressive and have reduced their buy offers. Consequently, the stock is now in a falling trend channel in Investtech’s short term price chart.
Stocks in falling trend channels indicate that investor optimism is weakening and have statistically been followed by negative excess return compared to other stocks, according to Investtech’s research into the Nordic stock markets. Further weak development is indicated for Tesla.
Historically Tesla has fluctuated by 45 per cent monthly, thus the risk is very high. A new sell signal will be triggered if support at 565 dollars is broken, and there will be no further support in the price chart at this point.

Recommendation: Negative

GameStop Corporation (GME.US) Close: 183.75 (+63.41), 25 Mar 2021

GameStop increased twentyfold during a few surreal weeks in January. Lucky investors managed to buy the stock at 20 dollars and sell at over 300. Then the stock fell almost 80 per cent in a week, and some unlucky investors lost most of their investment practically overnight.
Trading volume in GameStop has been huge. Several times investors have traded for over 10 billion dollars, which equals many times the total volume on the Oslo Stock Exchange.
The technical picture in GameStop is fairly neutral. Investtech’s chart shows resistance at 270 dollars and support at 40 dollars. The current price is far from these levels, percentage-wise.
This Wednesday the price fell 33 per cent, and yesterday it rose 53 per cent. Monthly volatility has been 160 per cent, and the risk is extreme.
Many investors will continue to make or lose a lot of money in this stock. If you are looking for a “lottery stock” and want to trade in the US market, GameStop is an obvious choice. The odds are better than for buying a lottery ticket, but the risk of losing is very high.
We recommend that long-term investors stay far away from GameStop. Investtech’s research into the Nordic stock markets shows that similar “lottery stocks” have clearly underperformed vs benchmark in the long term.

Recommendation: Negative
 

The analyses are based on closing price Thursday March 25th 2021.