A bearish “death cross” pattern has appeared in Tesla Inc.’s stock chart on Thursday, but history suggests it isn’t as ominous as it sounds.
A death cross is when the widely-followed 50-day moving average, a short-term trend tracker, crosses below the closely watched 200-day moving average, which is viewed by many as a dividing line between longer-term uptrends and downtrends.
Many technicians believe that cross marks the spot where a shorter-term pullback morphs into a longer-term downtrend.
Keep in mind that death cross patterns aren’t always good market-timing tools, as they are well telegraphed, but they can help put a stock’s recent performance in historical perspective.
Tesla’s stock TSLA, +5.91% surged 3.9% in morning trading Thursday, and has bounced 9.0% in two days. At Tuesday’s 11-month closing low of $628.16, the stock had plummeted 49.9% since closing at a record $1,229.91 on Nov. 4, 2021.
The electric vehicle maker’s stock has been hurt by supply chain issues and COVID-19-related lockdowns in China, as well as concerns that Chief Executive Elon Musk may be distracted, and could selloff some of his holdings as a result of his buyout deal for Twitter Inc. TWTR, +5.41%
That selloff has been sharp enough and has lasted long enough for the 50-day moving average to fall to $910.78 on Thursday from $914.40 on Wednesday, according to FactSet, to cross below the 200-day moving average, which slipped to $912.30 from $912.55.
FactSet, MarketWatch
The last death cross appeared on July 9, 2021. The stock closed that day at $656.95, and has gained 4.3% since then. That last death cross had appeared about seven weeks after it hit its final low, after a 36.2%, five-month tumble.
Also read: Opinion: The Dow, S&P 500 and Nasdaq have now suffered a ‘death cross’ — here’s why this could resurrect them.
Thursday’s death cross is the 10th in 10 years, while the stock has skyrocketed about 115-fold over that time. In comparison, Apple Inc.’s AAPL, +1.14% stock has produced three death crosses in 10 years and rallied about 7-fold over that time, and automaker General Motors Co. GM, +4.31% has produced nine death crosses and has advanced 67% over the same time.
The S&P 500 index SPX, +1.71% has produced five death crosses and has more than tripled in 10 years.
—Claudia Assis contributed to this article.