Tesla (TSSA) & More – When Big Momentum Stocks Break Down
Peak To Trough and 50% Declines On Some Big Names
Tesla (TSLA) is now down 38% from its peak and appears to be suffering the same fate as many other momentum stocks before it. In order to help chart what TSLA's decline could look like, below is a list of the number of weeks that it took 11 other broken momentum stocks to lose 50% of their value from their peak.
12 Momentum Stocks 50% Retracement Table
[1]
It took these stocks 12 weeks on average to lose half of their value. If Tesla matches that pace it could be below $100 by mid December. On average, these stocks lost 91% of their value before their declines were over and the average duration of decline from peak to trough was 100 weeks (about 2 years).
Of course for every example here there is probably another example of a momentum stock that appeared to break but then recovered. Chipotle (CMG) and Monster Beverage (MNST) are two that come to mind that came close to 50% declines before recovering. Indeed, several of the stocks on this list (Netflix (NFLX) for example) have recovered quite a bit from their drawdowns. In the end though, valuation always wins.
Courtesy of Scott Krisiloff, Avondale Asset Management [2]