Tesla plunges to halt six-day vertical rally

Tesla fell wednesday after an incredible 60 percent jump in six days. Shares in the electric car maker fell 9.4 per cent to $803.63, which rose to $968.99 on Tuesday, seemingly unstoppable. Analysts at Canaccord Genuity downgraded their stock to hold after the rally, fearing that its Shanghai plant could be struggling.

Tesla plunges to halt six-day vertical rally

“Look, everyone has their pain threshold,” Steve Eisman, senior portfolio manager at Neuberger Berman Group, told Bloomberg Television’s Tom Keene on Wednesday. The investor, who shorted subprime loans before the 2008 financial crisis, said he had already flattened his position on short Tesla in 2018.

Tesla’s share price has risen rapidly over the past three months and has accelerated at an alarming rate over the past week, thanks to two strong quarterly results, the rapid construction of its Chinese plant, a pre-expected release of its new Model Y and an early profit for a battery plant. Some also pointed to Tesla’s large short positions and said that at least part of the rise was due to short positions eager to close.

“Many investors have difficulty judging the rationale of this trend through fundamentals,” Morgan Stanley analyst Adam Jonas said in a note to clients.

That sentiment may eventually have affected the stock, which plunged $109 from its intraday high just before Tuesday’s close. The stock closed yesterday at $887.06, still up 112 per cent in 2020.