Analyst reads full-fledged capitulation in Tesla as it becomes the most purchased stock

Vanda research firm says that Tesla, Inc. (NASDAQ:TSLA) is set for a huge capitulation in 2023. That comes amid increased retail interest in the stock at low valuations. The electric vehicle maker’s stock has lost more than 60% year-to-day amid macroeconomic woes.

Vanda’s senior analyst Marco Iachini says that Tesla’s net retail buys have increased 424% this year to hit $15.41 billion. The volume has surpassed Apple, which recorded $15.21 billion worth of net purchases in the year, up 18%. Iachini says Tesla’s inflows declined when it initiated a 3-for-1 stock split in August. Since then, purchases have been growing strongly.

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A further note by the analyst is that Elon Musk’s antics as Twitter CEO boosted TSLA buying. Iachini says investors took advantage of the resulting stock decline to buy. The analysts view the rising retail interest as a signpost of a likely capitulation next year. However, Vanda points out that the average retail portfolio is just 11%. But what does capitulation mean?

Capitulation is associated with market bottoms. It occurs when investors throw the towel and sell their holdings for fear of further losses in a bear market. Capitulation is often associated with a bullish market since beyond this point, there is no further selling or that sellers are overdone. That sets the ground for price recovery. Whether Tesla stock is due for a capitulation depends on the next price action. But at the moment, the price is exceedingly bearish.

TSLA technical outlook and analysis

TSLA Stock Chart by TradingView

Technically, TSLA trades in an exceedingly bear market. The volume indicators show the sell-side remains strong. The stock has entered the oversold region, although there is no clear sign of a recovery.

A capitulation event awaiting TSLA?

It is hard to judge, especially when a confluence of macroeconomic factors are at play for TSLA. However, TSLA remains a favourable stock should a bull market get started. 

Coupled with the depressed valuation after the bear market, the stock is favourable. We recommend investing once the stock market becomes clear, potentially catching a lower bottom.