Tesla has been on a massive bull run, soaring over 900% from its March lows of $72 to $660 today.
On the 16th December, it was announced Tesla would be included in the S&P 500 . Tesla became eligible to be included in the S&P 500 after posting its fourth consecutive profit in the second quarter of this year, though Tesla has joined until now.
Typically how this works is when a stock is added to the index, another company comes out. The market cap of the new company is usually larger than the exiting one. Since the S&P 500 index is market cap weighted, the weightings of all the other stocks need to come down to make room for the new company.
Tesla will enter the S&P 500 as the 7th largest stock. This has never occurred before.
According to S&P Tesla’s addition to the S&P 500 will be based on the closing prices of Friday Dec. 18, coinciding with the expiration of stock options and stock , which should help facilitate the addition because of the high trading .
Basically funds that are benchmarked to S&P need to have Tesla "in their books" on coming Friday's closing price.
This event has also occurred with TSLA touching the top of a 10 month . The 50 day moving average and the lower supporting of the is some way away.
TSLA has run up 60% on the news of S&P 500 inclusion. TSLA ran up 80% on the news of the stock split back in August and then fell 35% in the next 4 trading days.
Price movements in TSLA are likely to be heavy and dynamic. Could TSLA see some downside as it takes a breather?