The US indices managed to close higher on Friday and pared more than 50% of losses suffered in the week. In general, since the beginning of this year, USA500.S and the tech-heavy USA100 have fallen nearly 20% and 15% respectively. It is worth noting that historically a 20% drop in stocks represents a “bear” market and may indicate pain for the real economy, or, in simple terms, a recession.
Musk’s acquisition of Twitter remained under the spotlight all week. On Friday, the Tesla CEO said that the deal is on hold, which led to the Twitter share price gapping lower on open at $40.13 (over 12% below the close price of the previous day), while the Tesla share price gapped higher on open at $765.21 (over 5% above the close price of the previous day). However, as Musk reiterated that he is “still committed to the acquisition”, the former slightly recovered and closed at $40.71, while the latter remains above the high point of the previous day, at $768.09.
Changes are expected after Musk takes over Twitter. Besides weeding out bots and spam accounts, he has previously mentioned free speech and content moderation, the introduction of an edit button, open-source algorithms, eliminating scams, etc. Also, an approval from regulators is required (duration remains a mystery) before Twitter Inc. turns into a private company (but may go public again in minimum three years?). Too many uncertainties lie ahead for the communication company which has over 200 million daily active users. The company reported net income $513 million y/y (or $0.61/share) in the first quarter ended March 31.
On the other hand, Tesla is also not in a good position. Supply chain woes persist up to the point that the company might stop taking orders on some vehicles in the near term. A flurry of lawsuits is another headwind to the company. In addition, recent crashes of cryptocurrencies have inevitably hurt Tesla, in which it is reported that all of the company’s gains on bitcoin have been wiped out.
Technically, #Tesla remains traded above levels seen in Aug’21, with nearest support at $696 and recent lows at $680, followed by $630 (a strong RtS level formed in June-July 2021). An ability to sustain bullish momentum may push the price higher towards testing the nearest resistance at $813, followed by $895 and the 100-Daily SMA. On the other hand, #Twitter hovers near support $41 and the 100-Daily SMA. An ability to hold above these levels suggests an opportunity towards testing the resistance at $47, $52 and the highest point seen this year at $54.54. Otherwise, if the asset remains pressured below the said support, next target level will be $35.50, then the lows seen this year at $31.17, followed by nearly the 2-year low at $28.15.