Momentum traders were chasing Tesla Motors Inc (NASDAQ:TSLA) on Monday morning after the company’s stock began to spike. At time of writing the firm’s shares had increased in value by more than 4%, reversing declines seen in the last five days of trading. The reasons behind the jump are unclear, but the company revealed two big pieces of news this morning that may have added top positive feeling around the stock.
On Sunday Pennsylvania governor Tom Corbett signed a bill into law that will give permission for Tesla Motors Inc (NASDAQ:TSLA) to open up five dealerships in Pennsylvania. Saturday saw the Chinese government publish rules mandating that one third of government vehicles must run on electricity. Both of these are incremental positives for Tesla and probably contributed to the company’s rise in price on today’s market.
Tesla wins in China and in Pennsylvania
A set of regulations concerning the purchase of vehicles by the Chinese government mandates that 30% of all new vehicle purchases be electric. The news is probably an incremental positive for Tesla Motors Inc (NASDAQ:TSLA), but it likely increases the chances of real competition coming out of China in the coming years. Right now Tesla is heavily reliant on China for its base, and home-grown competitors could put a spanner in those particular works.
Pennsylvania’s allowance of 5 Tesla Motors Inc (NASDAQ:TSLA) dealerships is a certain marginal positive for Elon Musk’s company, but the increase of Model S sales in that state surely doesn’t justify a 4%, or more than $1 billion, rise in the value of the company. Today’s jump may have been a single large purchase, or even a short squeeze, but it’s difficult to ascertain the true impetus.
Tesla momentum difficult to explain
A hot stock like Tesla Motors Inc (NASDAQ:TSLA) has so many investors following it, and a valuation so divorced from the actual, that the day-to-day movement in the company’s stock is very difficult to explain. The opening of dealerships in Pennsylvania and the greater optimism about the Chinese market, along with a strong tech market on Monday, may all have contributed, but the 4% bounce in price is difficult to explain and is likely impossible to predict.
At around 10:40 EST this morning stock in the electric vehicle maker began to spike. It hit a peak of just over $228 per share, a level not seen since July 3, and fell slightly. Both of the pieces of news that added to the company’s rise were known well in advance of 10:40 this morning, so there is little reason that the company’s stock didn’t move earlier, if it was those releases that caused the spike.
Regardless of what caused the initial rise, momentum breeds momentum. After the initial jump in price Twitter was ablaze with investors commenting on their strategy for playing the movement. Tesla Motors Inc (NASDAQ:TSLA) stock was up by more than $10 at 11:44 AM EST. Whether that number heads higher depends more on the feeling of the market, and whims of chance, than it does any minor story about the company.