Tesla share price recovers

Tesla’s share price has recovered from Friday’s near 10% drop following an email the company's CEO, Elon Musk, sent to Tesla executives on Thursday - which was seen by Reuters on Friday - in which he said he has a “super bad feeling” about the US economy and needed to cut jobs by about 10%.

In another email to Tesla employees on Friday, Musk said that he would reduce salaried headcount by 10% since the company had apparently become “overstaffed in many areas” but that “hourly headcount will increase.”

On Saturday evening Musk seemed to have backtracked slightly when he tweeted “total headcount will increase, but salaried should be fairly flat” which has so far led to a near 4% jump in Tesla’s share price in pre-market trading.

Ahead of these emails, Musk on Wednesday sent an email to his employees in which he issued an ultimatum to return to the office for a minimum of 40 hours a week and that failure to do so would be taken as a resignation.

The company and its subsidiaries employed almost 100,000 employees at the end of 2021, according to a Tesla regulatory filing.

Tesla’s share price has volatile start to the year

Tesla’s share price has had a difficult start to the year, first falling by around 40% from its early January high to its February low before rallying by nearly 65% to its early April high, only to then fall back again by around 45% and trade at near one-year lows made close to the $618 mark in late May.

These large swings in Tesla’s share price took place amid general market risk-off, and more recently, risk-on phases of several weeks’ duration, accompanying the war in Ukraine, now in its 103rd day, global central bank monetary tightening and a two-month lockdown in China, which has to a large extent been lifted since the beginning of June.

Musk on Thursday said Tesla’s prototype of Optimus, a humanoid robot, could be ready by the end of September and thus by the company’s AI day which has been pushed back to 30 September. He previously said that Tesla’s robot could be launched early next year and that “Optimus could eventually address global shortages of labor, and in the short-term might be able to carry items around a factory.”

There remain clouds on Tesla’s horizon, though, with competitors in the electric vehicle (EV) sector such as Volkswagen, Europe’s biggest car maker, playing catch up and expecting to beat Tesla’s sales by 2025.

At the World Economic Forum in Davos, Switzerland, a couple of weeks ago Volkswagen’s chief executive, Herbert Diess, said alleviating supply chain issues would likely help create some momentum for the giant German automaker over the coming months. When asked why investors valued Tesla at such a premium over other traditional carmakers, Diess replied that “markets are always about the future” and that “we are still aiming at keeping up and probably overtaking [Tesla] by 2025 when it comes to sales.”

The Volkswagen CEO also stated that “I think for Tesla, also, ramping up now will probably be a bit more challenging. They are opening up new plants and we are trying to keep up speed. We think in the second half of the year, we are going to create some momentum.”

Where to next for the Tesla share price?

In late May Tesla’s share price broke out of its two-month downtrend channel and in early June revisited but has since then been rejected by its 2020-to-2022 support line, which, because of inverse polarity, acted as resistance.

The Tesla Daily Financial Bet (DFB) dropped to $731.00 on Friday, a slip through which would likely engage the February and 12 May lows at $691.69 to $680.15, whereas a rise above last week’s high at $792.55 would create a minor inverse head-and-shoulders pattern with the psychological $1,000 mark being back in sight.

The key technical levels to watch out for are therefore the late May low at $617.60 and the current June high at $792.55.

Below the May low at $617.60 lies major long-term support between the August 2020 high, March and May 2021 lows at $545.04 to $538.38. Since several monthly highs and lows come together in this region, the Tesla share price is likely to stabilise, at least short-term, within this support zone, were another down leg to be seen.

Below this significant support zone there is no support to speak of until the minor psychological $500 mark. For the Tesla share price to reverse its fortunes, a daily chart close above its last reaction high, meaning a daily candle which has a higher high than the candle to its left and to its right, namely last week’s high at $792.55, needs to be seen.

Upside targets in this scenario are the 55- and 200-day simple moving averages (SMA) at $894.59 to $913.51 and also the May peak at $955.23 as well as the $1,000 mark.