Image Source: arstechinica.com
Chart Source: Tradingview.com
Tesla surged over 10% when it was announced that its finally added to the S&P500 effective 21 Dec 2020 (Monday). Inclusion is based on qualitative and quantitative analysis and being included gives a mark of confidence to investors. There is over USD 11.2 trillion in assets benchmarked to the S&P500 and roughly USD 4.6 trillion of this total is in index funds. The index includes 500 leading companies and an inclusion in this index brings more funds and investors to the company. So with an inclusion, it’ll probably receive more attention as pension funds, 401K and funds over the world start to add tesla to their portfolio.
To be included inside the index, a company needs to have an accumulation of 4 consecutive quarters of net profits. Tesla had 5 and in the third quarter delivered a record number of 140k cars and is on track to deliver 500k cars this year. In fact, in sept it wasn’t included and its price started to fall and touched the 50ema. With a market cap of 400b and overtaking even Visa it was probably a matter of time before its included.
So with the news of the inclusion , what might we expect? The resistance for Tesla is around $458 and being able to close above it then we might see a push towards $500. It has also recently reached the 50ema which we mentioned in our post. Traders, investors might start piling into tesla when it opens tonight and optimism might be growing as now it seems that tesla is less risky of a stock. As mentioned in our previous post on tesla, with biden’s push for green energy, tesla could also benefit from it. Also, tesla is a tough stock to trade and we prefer to be invested in it rather than taking the spikes in volatility.
Want to know how to trade the US markets?
Contact Us now