TESLA Sell Off – The Reason Behind Today’s Panic Selling

Hello Traders, here is my analysis for why I believe TESLA (and others) had another day of large selling.

– To start, the broader market as a whole only sold off a small percentage today, around 1% to 2% for most stocks. So why is it that Tesla once again sold off almost 12% in a single day?

– Well to be clear, Tesla was just one of the names in a particular group of stocks that saw heavy selling today, what do these stocks all have in common? They're “Hype Stocks.”

What are “Hype Stocks”, they're a group of stocks that retail traders hyped up in 2020-2021 and bought in mass, pushing these stocks into having insane P/E ratios and being incredibly overvalued.

– What stocks accompanied Tesla in today's sell off? TESLA -12%, NVDA -7%, AMC -8.5%, GAMESTOP -9% and COINBASE -8% just to name a few.

– Being as these stocks all belong under the classification of “Hype Stocks” and all sold off heavily compared to the rest of the market, there's an obvious confluence between the type of investor who was selling.

– Given this, it is a clear indication that these investors are starting to panic, which is the reason for the selling.

So now you might be wondering… why aren't investors buying at these discounted levels?

– The reason is simple, big investors are still in the process of end of year tax loss selling, and in addition these investors do not want their clients to see that they have stocks such as TESLA in their portfolio at the moment.

The good news is, the January Effect is just around the corner

– The January effect is where the heavily sold off stocks who endured tax loss selling, rally in January due to their being more buyers in the market than sellers.

– So for names such as TESLA which has been incredibly beaten down and no investor wants to buy until the new year, we will likely see TESLA rally in after the new year.

To summarize…

– Retail traders who bought these stocks off Hype in 2020-2021 are panicking and dumping their shares, while big investors do not want to buy until after the new year.

Thanks everyone