Why Are Tesla And Other Big-Name Stocks Selling Off In December? Here's 1 Potential Reason

Elon Musk’s Tesla Inc TSLA is down nearly 73% year-to-date, marred by the billionaires' purchase of Twitter, prompting investor uncertainty with regard to its growth assets.

It’s not just Tesla. Other pandemic-favorites like Meta Platforms Inc META, Netflix Inc NFLX, and AMC Entertainment Inc AMC have taken a beating this year as well.

Though, looking at Tesla — the stock has fallen a whopping 43% since Dec. 1, leaving Benzinga to wonder: What is driving the stock lower? Are investors selling the once high-flying stock for tax loss harvesting?

Read also: This Critical Stock Strategy Can Save You Thousands In Taxes — But You Need To Do It By Dec. 30

It could be. Let’s back up a bit and set the stage.

Investors have until the last trading day of the year (Dec. 30) to realize any capital losses from tax selling, which they use to lower their tax obligations.

We’ll remind you here that Tesla is down 43% just this month.

Tax loss harvesting works by selling an asset with a capital loss to reduce the overall capital gains yielded by other investments and, as a result, paying less in taxes.

Investors looking to shore up any tax losses, need to sell their positions for a loss by Dec. 28, as for most stock trades, settlement occurs two business days after the day the order executes, or T+2 (trade date plus two days).

For example, if an investor were to execute a loss order on Wednesday, it would typically settle on Friday.

That said, let’s look at Tesla over the last couple of weeks, using the relative strength index (RSI) indicator, which tracks how much a stock is overbought or oversold.

For the uninitiated, the RSI is displayed as an oscillator (a line graph) on a scale of zero to 100. Anything over 70 is overbought, and anything under 30 is oversold.

Tesla, the electric-vehicle pioneer, has a current RSI of 16.56, firmly placing the stock in the oversold zone.

And, with the stock down 43% in just a couple of weeks, it seems investors may be targeting Musk’s company as a way to offset capital gains made on the year.

What about other stocks?

Ford Motor Company F, which is down nearly 50% year to date, and down 20% over the last month, has a current RSI of 17.61.

Lucid Group Inc LCID, which is down 35% this month, has an RSI of 20.33.

AMC is down 46% this month with an RSI of 26.09.

GameStop Corp GME is down 32% in December with an RSI of 28.71

PayPal Holdings Inc PYPL is down 15% over the last month and has an RSI of 28.65.

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