Forced Selling Makes Tesla a Buy By Lucas Downey, Contributing Editor, TradeSmith Daily If you only stare at the major indices, chances are you’ll think all stocks are suffering right now. But that couldn’t be further from reality. Money rarely “leaves” the market… Instead, it rotates around. Investors sour on one group, and buy into another. Kind of like when Health Care stocks were left for dead two months ago. We made the case that a rally could be ahead for this oversold group. Fortunately, we nailed it, as the XLV ETF has jumped 7.4% since while the S&P 500 (SPY ETF) has fallen 1.3%. Recent Health Care leadership has come at the expense of one of the hottest areas of the market: high-growth Tech stocks. Popular Mag 7 names are hurting… And one in particular, Tesla (TSLA), is reaching the value zone. (Disclosure, I own shares of TSLA.) Today, let’s take a view on the current market rotation taking hold. Then we’ll visit history and offer up a killer signal study suggesting TSLA is gearing up for a big move higher. | Recommended Link | | | | In the middle of this week’s volatility, an ultra-rare pattern has emerged in the markets that has only appeared three times going back 125 years. Last time this pattern appeared, backtests show it triggered certain tech stocks to soar thousands of percent over time… while devastating millions of Americans who failed to prepare. If you’re looking for answers on where the market’s really headed next, don’t miss our urgent briefing tonight, at 8pm ET. Click here to automatically secure your spot. |  | | Markets Aren’t Doomed… They’re Rotating While the S&P 500 has jumped a modest 1.25% in 2025, growth areas are getting sold hard. Below is a YTD S&P 500 sector snapshot. Dividend-rich areas like Health Care, Staples, and Real Estate are trouncing the S&P 500 – up 7.9%, 8.1%, and 5.3%, respectively. On the flipside of the rotation, growth-heavy Discretionary is down 5%, and Technology has fallen 3%: 
These rips and dips are causing wild spreads between stocks. Below shows this beautifully, with Tesla down nearly 20% in 2025, and Super Micro Computer (SMCI) up 75%. Notice dividend-rich CVS Health (CVS) and Altria Group (MO) are up 44% and 6%, respectively, while growth plays like Cadence Design Systems (CDNS) and Chipotle Mexican Grill (CMG) are down double digits. (Disclosure, I own shares of CMG, CVS, and MO.) 
I see the pain in growth stocks as a forced selling event. Market volatility has forced leveraged traders to sell off some of their largest holdings – namely these high-growth tech stocks that have dominated the market the past two years. But because of this, a big opportunity is now staring us in the face! Tesla Shares Are Extremely Oversold and Due for a Bounce Back in April, my colleague Michael Salvatore wrote about the screaming buy happening in Tesla shares. The setup arrived after TSLA shares dropped seven days in a row consecutively. That was a beautiful call… Because two months later, TSLA shares rode higher by nearly 29%! I think a similar setup finds us today. Over the past 42 trading days, Tesla shares are down a whopping 28%. We were able to locate 112 prior instances where Tesla fell at least 28% over the same time period. You’ll want to hug a bear after this study! Here’s what happens after such a steep decline: - A week later, TSLA gains 4.4%
- Two weeks later, TSLA leaps 9.1%
- One month later, shares drive 17.5% higher
- Two months after, you’re staring at a 28% average leap
Now, no one has a crystal ball and can tell you what’s coming. We have something better – cold, hard data. And it’s signaling that now is the time to look at beaten-down growth stocks getting unfairly sold. Tesla being one of them. These opportunities won’t be around forever. Make sure to take advantage of this rotation… before the deals drive away. Regards, Lucas Downey
Contributing Editor, TradeSmith Daily Note from Michael Salvatore, Editor, TradeSmith Daily: An ultra-rare pattern is forming in the markets right now that hasn’t been seen for 30 years. It has only appeared twice before going back to the year 1900 (in 1925 and 1996). It’s a strange category of market “melt-up” that creates hyper-exaggerated gains compared to even normal melt-ups. You have to understand that everything we’re seeing today, especially excess volatility in high-growth tech, is not the sign of an imminent crash. Instead, it’s a sign that the bull market has a long way to run… and will likely run much higher, much faster, than anything we’ve seen so far this century. Tonight at 8 p.m. Eastern, TradeSmith CEO Keith Kaplan will show you 10 of the best stocks for playing this event in 2025… including names and tickers. He’ll also show you 10 tech “time bomb” stocks poised to implode as this event unfolds over the next 12 months… You don’t want to miss Keith’s Last Melt-Up event tonight. Click here to automatically sign up to attend it. And be sure to tune in this afternoon for a special message from Keith that will help you prepare for the event. | 
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