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Did Tesla Bears Fumble? $1,200 Could Be Next

By Dr. Arnout ter Schure Stock MarketsJun 25, 2021 03:50PM ET
www.investing.com/analysis/did-tesla-bears-fumble-1200-could-be-next-200588347
Did Tesla Bears Fumble? $1,200 Could Be Next
By Dr. Arnout ter Schure   |  Jun 25, 2021 03:50PM ET
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Two weeks ago, Tesla (NASDAQ:TSLA) share price was struggling at its 200-day Simple Moving Average (SMA) and was, therefore, showing signs of concern. Using the Elliott Wave Principle (EWP), I found the Tesla bears had to close the price below $550 to target the ideal c=a relationship (black dotted arrow). I also stated:

"But the bulls need to crack $625 resistance and rally Tesla back above the 50-day SMA to suggest the alternate EWP count is operable, i.e., blue primary wave-IV completed with a shorter than usual c-wave. Thus, we have explicit "if/then" scenarios ready to deploy when triggered, and we are prepared for either direction the price decides to take."

Fast forward, and the bears, so far, fumbled, as the share price is now back above $625, its 50-day SMA and the downtrend line that has kept the April bounce high in check. See Figure 1A below.

I apologize for the busy chart, as I wanted to include the Ichimoku Cloud. It follows that when Tesla trades above the 50-day SMA and its "cloud," the odds are of good things happening, i.e., higher prices, increases. Just look at the second half of 2020.

Figure 1. TSLA daily and weekly candlestick charts with EWP Count and technical indicators

Tesla Daily And Weekly Chart.
Tesla Daily And Weekly Chart.

The weekly chart in Figure 1B shows the recent correction even better, with a clear (black) a, b, c wave down. This pattern is called a zigzag correction in EWP terms because the b-wave (the bounce into April) only retraced 61.8% of the prior a-wave, comprising five smaller waves (red i, ii, iii, iv, v). Typically the c-wave is then equal to the length of wave-a, targeting the low $400s in this case. However, in this bull market, buyers can step in much earlier thanks, in part, to the tremendous extra liquidity the Fed provides with its "it's not QE" fourth round of QE. Moreover, one can see how price has stalled twice at the blue 38.2% retrace of (blue) Primary wave-III. Again, this is a typical 4th wave level.

The technical indicators on the weekly chart are also starting to point back up, with some encouraging developments (black arrows on the RSI5 and FSTO). Thus, if the May low can hold, the bulls are in control, and the rally to $1,200 has started. The bears would want to see Tesla close back below "the cloud" and the 50-day SMA to tell us this correction is turning even more complex and pronounced because then the recent rally was only another b-wave.

Did Tesla Bears Fumble? $1,200 Could Be Next
 

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Did Tesla Bears Fumble? $1,200 Could Be Next

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Comments (10)
Axee Axee
Axee Axee Oct 25, 2021 4:01PM ET
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RL Trading
RL Trading Jul 30, 2021 10:08PM ET
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Hello Dr. Arnout, is your analysis on TSLA still valid? learning the ropes of EWP, appreciate your articles.
AWOOF LAUGHTER COMEDY
AWOOF LAUGHTER COMEDY Jun 26, 2021 5:50PM ET
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hello
JAMES CUNHA
JAMES CUNHA Jun 26, 2021 11:13AM ET
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I have seen this type of movement in other growth stocks.  I believe what we are seeing are descending peaks in anticipation of a broader market correction (or even crash when the Fed's policies actually do tighten). I believe most economists presently agree that the equity markets have transformed into asset bubbles from the Fed's prolonged low rates and accommodative QE.  I noticed as these asset bubbles continue to inflate, there are more frequent pullbacks due to investors' hypersensitivity over economic data in a Fed QE-driven equity market.
Andrew Bevan
Andrew Bevan Jun 26, 2021 10:09AM ET
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Predictions have been difficult of late. Tesla may 'not' have been a 'Dead Cat Bounce' and heading sub $600 to $400-425. Apple may 'not' be heading to $100-110. NSQ100 may 'not' be heading to 12500-12600 before its next step upward and Bitcoin may 'not' be ready to rally from $40.000 to 80.000.
Jouni Matero
Jouni Jun 26, 2021 10:09AM ET
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As well they may very well be doing exactly so. Don't get fooled to believe market only goes up, especially now when everything is super distorted and out of real valuations.
Benoit Avril
Benoit Avril Jun 26, 2021 10:09AM ET
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Nobody knows the market direction. It's mathematically impossible.
Dr. Arnout ter Schure
Dr. Arnout ter Schure Jun 26, 2021 10:09AM ET
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Agree. It has been a very tough environment to forecast as many markets and therewith underlying (types of) stocks are out of sync: when one rallies the under corrects and vice versa. Nothing we can do about. Trade safe!
Chris Johnson
Chris Johnson Jun 26, 2021 1:06AM ET
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No matter how good technicals look for Tesla, fundamentals are awfull. When sanity comes back to the market, we will see Teslas true value. And it's way below the current price!
Snake Plissken
Buff24seven Jun 26, 2021 1:06AM ET
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why would sanity ever come back? this market is not your fathers or your grandfathers things are changing and it's going to get very interesting.
Chris Johnson
Chris Johnson Jun 26, 2021 1:06AM ET
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Snake Plissken  So you say this time is different?
Miles Mathewson
Miles Mathewson Jun 25, 2021 9:35PM ET
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yeah because it's totally worth it lol
CHADWICK RICHINGTON
CHADWICK RICHINGTON Jun 25, 2021 5:50PM ET
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This will age like milk
Sccoott Mmaarrt
Sccoott Mmaarrt Jun 25, 2021 5:34PM ET
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Way to complicated with the charting
William Bailey
William Bailey Jun 25, 2021 4:01PM ET
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Im sure Tesla Trying to shake the shorts off …. But 8 month calls long way to go
Snake Plissken
Buff24seven Jun 25, 2021 4:01PM ET
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yea right now Michael berry is looking really stupid. but the game has just begun.
 
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