Between the common stock market phenomenon of an upward correction succeeding a deep downturn and the White House electric vehicle (EV) show, Tesla (NASDAQ: TSLA) entered a strong recovery by Tuesday, March 11.
By the closing bell on Wednesday, TSLA shares were trading at $248.09, following a 7.59% one-session rise. Despite the extended session featuring a pullback, Thursday’s trading is yet to be determined as the stock has retraced only 1.33% to $244.78 in pre-market hours.
Already during the latest session, but particularly if Tesla regains its upward direction on March 13, a major short squeeze might emerge.
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Tesla stock shorts rise as TSLA shares rally
Specifically, numerous traders showed their lack of confidence in the TSLA rally as the short volume ratio soared from 29.74 on March 11 to 40.13 on March 12, according to the latest data Finbold retrieved from Fintel.
While the Tuesday levels were the lowest seen in the last two weeks, they are, arguably, not as interesting as they followed the catastrophic 15% price collapse on Monday. The fact that the most recent recorded ratio is near a stable upper bound observable since late February but not the highest within the timeframe is more noteworthy.
Indeed, the two-week high short volume of 54.90 came on Friday, March 7, indicating that an exceptionally high proportion of investors accurately predicted that the start of this week would be devastating.
Elsewhere, both the traders’ willingness to take a short position against the biggest EV maker in the West and the uncertainty a Thursday short squeeze would emerge are indicative of the dire straits Tesla is in.
Why there may be no Tesla stock short squeeze
Though Donald Trump’s re-election was a powerful bullish catalyst for TSLA shares and took them to a new all-time high (ATH) at $479.86 by December 17, 2024, the presidency itself, at least by press time, is proving more bearish.
The President’s economic policies – primarily the use of tariffs and the associated escalation of a global trade war – on the one side and Elon Musk’s rhetoric and actions on the other have led to the EV maker losing much market share, with the worst of the damage concentrated in Europe.
While the stock market’s ability to rally this week despite the unnerving announcement that tariffs on Canada would become even higher – though the plan has been halted since – indicates that investors are less jumpy to macroeconomic headwinds, giving some silver lining, Tesla’s fundamentals have taken a severe beating.
Furthermore, the EV maker’s narrative of fully transforming into a big tech stock via the development of artificial intelligence (AI) and robotics has become somewhat less decisive as Chinese companies have been unveiling highly advanced products in recent months.
Effectively, such a setup indicates that, should it intend to carve market share in the technology sector for itself, Tesla will have to play catchup with Chinese companies, not just Silicon Valley.
Featured image via Shutterstock
