Tesla stock is now deeply oversold. That is a term, with mathematical foundations, that traders use to describe momentum in any stock's price. An oversold condition means that things have gotten really bad, really fast. When that happens, a lot of bad news is reflected in the stock price, and there is no one left to sell, so shares are typically due for a bounce.
That's one reason for optimism. Another reason is history. Bespoke Investment Group took at look at prior periods when Tesla stock fell more than 20% over a seven-day stretch. It found 23 instances since 2010 and found that big declines are a set up for big gains.
Tesla stock typically rises about 37%, 84%, and 238% over the next month, three months, and six months, respectively, after a the rapid 20%-plus drop.
"The performance numbers...are obviously pretty incredible, and with them we would note the usual caveat that past performance is no guarantee of future results, wrote Bespoke in a Monday report. Additionally, "given its market cap, the law of large numbers would make it nearly impossible for [Tesla] to post returns similar to those that were experienced in the past."
Tesla is too big to rise roughly 240% over the coming six months. That would make Tesla's market capitalization about $2.3 trillion -- equal to Apple's (AAPL), currently the largest among publicly traded companies.
These are just a couple of technical and historical tidbits for bulls to embrace. Like Bespoke points out, there's no guarantee of what will happen next for any stock, let alone one as volatile as Tesla.
A big upcoming event for the company and the stock will be Oct. 19, when Tesla reports third-quarter earnings.