January 24, 2022 5:31 AM
The pain most acutely felt in the tech sector, where lofty valuations have faced a confronting reality check. Best highlighted by a 20% plunge by Netflix last week as company executives slashed the number of new subscribers 50% below analysts' expectations.
While it's still too early to call a bottom in the tech sector, a study by Bank of America between Jan 7 and 13 suggests fund managers have cut their tech exposure to the lowest level since 2008.
An indication a good chunk of the speculative froth has now exited the sector, and a reason investors might like to consider at what price they would add preferred growth stocks to portfolios.
One such stock is Tesla, which remains light years ahead of its competitors in chips and batteries and expected to retain leadership in the rapidly growing EV market for the next few years—currently trading 25% below its early November $1243.49 high.
Tesla will report fourth-quarter and full-year earnings for 2021 after the market closes on Thursday morning. Please see my colleague Josh Warner's preview here of what is expected from Tesla's earnings report.
Just before Christmas, we recommended buying Tesla here near $1000. The Tesla share price rallied over 20% reaching and breaching the first profit target of the trade, the mid-November $1201.95 high before falling back towards $900.
This week we would consider buying Tesla on a dip into the $875/850 support area, placing a stop loss at $797 ($15.00 below the 200-day moving average, currently at $812.00).
The first profit target would be resistance at $980/$1000. The second profit target is resistance at $1110, providing a trade with a 3:1 risk-reward ratio if both profit targets are reached.
Source Tradingview. The figures stated areas of January 24th, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
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