Buy The Dip! Tesla & Nasdaq Poised for a Comeback

U.S. stocks have sharply deviated from their previous slow bull trend, suffering consecutive declines. Yesterday, the market experienced a "Black Monday", with Tesla plunging 15%, marking its worst single-day drop since the 2020 pandemic crash. Meanwhile, the Nasdaq Index plummeted 4%.

Trump's Comments Trigger Market Sell-Off

The immediate catalyst behind the sell-off was Donald Trump's remarks regarding the U.S. economy. In a recent interview, Trump did not rule out the possibility of a recession. When asked whether his tariff policies could drive up inflation, he bluntly stated:

Tariffs could rise over time. They might go up. I don't know if that's predictable.

Recession fears and rising tariffs are two of the biggest concerns for market bulls—both of which were directly triggered by Trump's comments.

Bear Market or Buying Opportunity?

With stocks in free fall, investors are debating whether this is the start of a bear market or a rare buy-the-dip opportunity. The U.S. economic outlook remains uncertain, but history provides valuable insights into how markets tend to react after significant drawdowns.

Tesla: Oversold and Historically Resilient

Tesla has been one of the hardest-hit stocks in this sell-off. The stock's 14-day RSI (Relative Strength Index) has dropped to around 20, signaling extreme oversold conditions.

Historically, there have been five instances where Tesla's RSI fell below 22 (including the current one). In all previous cases, Tesla delivered positive returns over the following 1-month, 6-month, and 1-year periods. While history does not repeat exactly, it often rhymes.

Nasdaq: Strong Rebound Potential

Another major casualty of the sell-off is the Nasdaq Index. The 14-day RSI for the Nasdaq-100 has dropped below 30, also signaling an oversold market.

Looking at historical data, every time the Nasdaq-100 RSI fell below 29, the index had a greater than 50% probability of delivering positive returns over the next week to one year. Moreover, the longer the holding period, the higher the expected returns.