Tesla stock drops over 2% on Friday to close at $736.27.
House Democratic EV plan should boost the stock on Monday.
Democrats’ plan includes more credits for purchases of electric vehicles.

Tesla shares slid slightly on Friday as the equity market sold off again with the Dow, Nasdaq and S&P 500 all closing nearly 1% lower. As we have mentioned before, Tesla is a high beta stock, meaning it moves more than the underlying indices. This was the case again as the stock gave up nearly 2.5%. Importantly though, Tesla looks to have held the bullish trend evident in both short and medium term time frames. The stock has been making slow and steady progress higher, but despite the equity market looking shaky, Tesla could be set for more gains this week. A proposal from House Democrats over the weekend should certainly benefit the electric vehicle (EV) sector leader.

The House Ways & Means Committee will vote on the proposal on Tuesday. The proposal would boost credits for union-made, zero-emission models assembled in the US. The measure would also lift the current cap on EV credits, which Tesla had hit on existing incentives. Already, Tesla shares appear to be taking the news well in Monday’s premarket session with the stock trading just over $740. Other automakers have reacted negatively with both Toyota and Honda criticizing the plan. Toyota (TM) said the plan discriminates “against American autoworkers based on their choice not to unionize.” Honda (HMC) gave a similar anti-union statement.

Tesla key statistics

Market Cap
$728 billion
Price/Earnings
394
Price/Sales
23
Price/Book
29
Enterprise Value
$756 billion
Gross Margin
22%
Net Margin

6%

52-week high
$900.40
52-week low
$329.88
Average Wall Street Rating and Price Target
Hold, $704

Friday saw a nice retracement to the 9-day moving average. We would have preferred Tesla stock to hold the $741 support, but stopping with the 9-day moving average close by will have to do and does keep Tesla bullish in our view. The momentum is stalling as shown by the flattening Moving Average Convergence Divergence (MACD) and the turn in the Relative Strength Index (RSI). The newsflow in relation to the House Democrats’ proposal should push the stock on, and we would like to see Tesla break last week’s high at $764.45 to keep the momentum going and attract new buyers into the stock. Momentum creates momentum. Holding above $730 is key to the more medium-term bullish view. For the short term, we want $741 to hold.

The call: bullish above $741, neutral from $741 to $700 with a buy-the-dip zone at $705. Bearish under $700 with a buy-the-dip zone at $680.

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