Three stocks to watch this week: Tesla, FMG and CSL

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Telsa’s share price jumped double digits last week despite Elon Musk confessing the company is losing money so why are investors seeing this as long-term good news despite the disappointing headline?

Source: Bloomberg

 

Indices Shares Tesla, Inc. Price Recession Elon Musk

Hebe Chen | IG Market Analyst, Melbourne | Publication date: Monday 27 June 2022

Global equity wrapped up with a strong comeback last week which was quickly followed by the worst weekly decline since the start of the pandemic. Investor's hopes were re-ignited by some unexpected economic data that was seen as potential support of a 'soft landing' and as a result, the Australian share market enjoyed robust gains on Monday led by tech stocks and lithium players.

A rough second quarter in the market will come to an end this week however, considering the new month ahead, July will introduce a new round of rate rises around the globe as traders expect that uncertainties will still be challenging.

Today, we look at three popular stocks:

Tesla

Tesla's shares jumped up by double digits last week despite CEO Elon Musk confessing that they are losing money. Mr Musk stated last week that Tesla's new factories in Germany and the US are 'losing billions of dollars due to battery shortages and supply disruptions in China. In recent weeks Mr Musk has been warning of job cuts and a US recession and while the comment was disappointing for the near-term outlook, investors are seemly willing to embrace a long view to betting on the EV leaders' capability to overcome the imminent challenge.

In the interim, the automaker has announced cost-savings measures and the plan for a cut to its headcount which is expected to offset the increased cost issue as Tesla remains committed to its goal of producing 1.5 million vehicles this year.

Tesla's shares have fallen 40% over the past three months and reached their lowest level since July 2021. The bounce from last week has managed to break through the months-long trendline and is on the way to forming a double-bottom. A more convincing bull-overturn can be expected once the price conquers the $780 level and a breakout spot from the weekly chart is also encouraging for the long-buyers. On the slip side, the 20-day moving average will be the critical support if the bull trend fades for the EV makers.

Daily chart

Source: IG

Weekly chart

Source: IG

Fortescue Metals Group

Fortescue Metals Group’s share price has been hammered since early June as China's demand for iron ore weakened. Iron ore topped US$144 earlier in June as investors digested news that China was easing its pandemic lockdown measures and hoped the economy would recover soon. However, the global recession fears quickly doused the hope with ever more profound concern and that saw the Fortescue share price down 21% since June 8th at $21.63.

Pulling back to the floor level of the year, the share is currently seeking support from the level of $16.7, which, if broken, will bring the price to the November low and retest the area below $16. On the other hand, the March low at $17.5 will be an imminent challenge to overcome.

Daily chart

Source: IG

CSL

As the leading biotechnology company and third-largest company on the ASX, CSL’s share price has tumbled lower with the market in 2022. Since the start of the year, the global biotech’s shares have lost nearly 10% of their value.

The recent volatility across the equity market has been triggered by the prospect surrounding more possible rate hikes to combat inflation but the outlook for CSL should remain robust for two reasons.

First, the demand is rising for defensive stocks. Pharmaceutical companies are responsible for producing vital medicines and treatments and these are often treated as priorities for governments and consumers, so their spending is unlikely to be precipitously cut during a downturn.

Secondly, the company has grown at a strong and steady pace with revenue increasing at a rate between 7 to 15% during the past five years. Its steady and high growth outlook should make the discounted price more attractive to the long-term buyers.

From a technical viewpoint, the price has bounced back on the 50-day moving average and looks to be on the way to the $274 level before challenging May high at $279. The level of $268, where the current 20 days MA sits, should be a major support for now.

Daily chart

Source: IG