Tesla Inc. shares experienced a decline today, driven by two significant developments: a new investigation by U.S. auto safety regulators into the emergency door release mechanism of the 2022 Model 3, and a drastic reduction in a key battery-material supply agreement with the South Korean firm L&F. Despite this downturn, an analysis of the company's technical indicators suggests a continued bullish outlook for the stock's long-term trajectory.
U.S. automotive safety authorities have initiated a comprehensive defect investigation into approximately 179,071 units of the 2022 Tesla Model 3. This probe stems from concerns that the vehicle's emergency door release might be challenging to locate or operate during critical situations. Reports indicate that the mechanical release is often concealed, lacks clear labeling, and is not intuitively designed, particularly for passengers seated in the rear. This inquiry adds to the increasing regulatory scrutiny Tesla has faced in recent years regarding various safety aspects of its vehicles.
Concurrently, South Korean battery-material supplier L&F announced a dramatic revision to its supply agreement with Tesla. The anticipated value of the 2023 agreement plummeted from an initial estimate of $2.9 billion to a mere $7,386. L&F had planned to furnish high-nickel cathode materials for Tesla's 4680 battery cells through 2025. However, Tesla's production of these batteries has been lower than projected, and the sales performance of the Cybertruck has fallen short of CEO Elon Musk's ambitious forecasts. Consequently, Tesla required significantly less material than originally anticipated, leading to the substantial reduction in the supply contract's value.
From a technical standpoint, Tesla's stock is currently trading above its primary moving averages, indicating a favorable market sentiment among investors. The stock's price is comfortably positioned 0.7% above its 20-day Simple Moving Average (SMA), 4.5% above its 50-day SMA, and 12.3% above its 100-day SMA, all of which point to robust upward momentum. The Relative Strength Index (RSI) stands at 57.30, placing it in a neutral zone, suggesting that the stock is not overbought and still has potential for further gains before reaching an overextended condition. Additionally, the Moving Average Convergence Divergence (MACD) is situated above its signal line, reinforcing the bullish momentum, even in light of today's price reduction. Key support for the stock is identified at $383.00, while resistance is set at $474.00. A golden cross, which occurred in September when the 50-day SMA surpassed the 200-day SMA, provides a strong positive signal for the stock's long-term trend, often signifying a transition to a more sustained bullish phase.
Despite the recent dip, Tesla's stock has demonstrated an impressive 11.25% increase over the past year, highlighting a resilient longer-term uptrend. The stock is currently trading at 87.8% of its 52-week range, indicating it is closer to its peak performance than its lowest point. While this positioning underscores the company's underlying strength, investors should remain vigilant for potential price pullbacks as the stock approaches critical resistance levels.