Tesla’s stock is forming a bubble and new buyers should buckle up for a crash.

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MarketWatch.com  reports: “Tesla is a bubble that is going to pop.” That’s the headline of a column I wrote in early February — and I’m repeating that prediction now. To be sure, I have no expectation that this forecast will come to pass quite as quickly as it did after my early-February column. Over the six weeks following its publication, shares of Tesla TSLA, +10.78% dropped almost 60% in a plunge that admittedly was caused in large part by the coronavirus pandemic-induced bear market. COVID-19 had nothing to do with my forecast then”.

“Instead, the prediction was based on the sheer magnitude of Tesla’s stock price runup in prior months. According to a model constructed by three researchers at Harvard, the odds of a crash increase in lockstep with how much a stock has gained over the recent past. Put simply, the higher a stock goes, the harder it falls”.
“This is not the case for Tesla. But there may be another factor that just as effectively discourages the shorts from betting against Tesla: the stock’s extraordinary volatility. Tesla’s stock — even if it does well over the long-term — is now too far ahead of itself.
 

 

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