Oil has been down sharply over the past 3 months and is consistently hitting new lows. This has wreaked havoc on the energy sector, but has created some interesting buying opportunities. The price of oil collapsing has caused people to rethink if Tesla is a viable option for the future or if this is a short term blip on the radar. The world spent 700 billion dollars exploring for oil last year, the most ever! However only a 4 1/2 month supply was created. Clearly the world will need to eventually move to an alternative energy source. If you believe Oil prices are the reason Tesla has decreased in share price, then now could be a great time to look at the stock.
Tesla vs. United Stated Oil Fund
Over the past 3 months Oil and Tesla have both fallen apart. Tesla is down 25.4% on an absolute level, and down 5.5% vs. the industry. During this same time period the United States Oil Fund is down -32.1%.
If we look at the 6 month price chart of TESLA, we see that the stock has erased its gains over that time period.
EPS is in the bottom 10% of its regional industry however, it has been slightly raised over the past month to -5%. Given the fact that oil prices have been so depressed, analysts are worried about the demand for electric cars, as well as how easy it is to sell cars directly to consumers.
Tesla is now technically oversold and a backtested Bollinger Band buy signal has fired on the shares. Typically Tesla rises 62% percent of the time in the 20 trading days after breaching the lower Bollinger Band, with an average return of 14% when successful. This creates a buying opportunity for a stock that has been sold off aggressively. If you still believe in electric transportation, now could be the time to increase position size.