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Is A Significant Tesla Correction Imminent?

By Dr. Arnout ter Schure Stock MarketsJan 14, 2021 03:23PM ET
www.investing.com/analysis/is-a-significant-tesla-correction-imminent-200555959
Is A Significant Tesla Correction Imminent?
By Dr. Arnout ter Schure   |  Jan 14, 2021 03:23PM ET
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On popular demand, it is time to offer an update on high-flier Tesla Inc (NASDAQ:TSLA). Back in early December, I expected it to reach the high-600s to low-700s. Yet, here we are in the mid-800s. What happened?

As is not uncommon in this bull market, it experienced what in the Elliott Wave Principle (EWP) world is called an extended 5th wave in the major- and intermediate-degree. Those can always happen and are impossible to know beforehand.

The EWP's beauty is that in an impulse, we know after wave three comes four and, after four, comes 5. Looking at the daily chart in Figure 1 below, TSLA has each time pulled back into the ideal 4th wave target zones (23.6 to 38.3% retraces of the prior same-degree 3rd wave) and rallied from there. Now, it should be completing (green) minor wave-4, followed by a minor-5 to complete (red) intermediate-v of (black) major-5.

Figure 1. TSLA daily and weekly candlestick chart with EWP Count and Technical Indicators:

TSLA Daily And Weekly Candlestick Chart With EWP Count.
TSLA Daily And Weekly Candlestick Chart With EWP Count.

The weekly chart in Figure 1 shows that when major-5 completes, at around current levels ($875-925), assuming (green), minor-5 does not subdivide into five smaller minute-waves, (blue) primary III completes and Primary-IV will take center stage. There are currently negative divergences developing on the weekly technical indicators, foretelling of a pending more extensive correction. Although divergence is only divergence until it is not, the RSI5 (relative strength) is weakening since February 2020, and so is money flow (MFI14). The latter is crucial as it means less money is pouring into Tesla's stock at current levels. Since liquidity drives markets, divergences on money flow, both positive and negative, can help identify potential turning points.

A correction of the primary-degree is a large one, in both time and price, and suggests TLSA should see between $560-600 before primary-V to new all-time highs kicks in. These all-time highs should be in the $1200-1500 region. It is even possible for TSLA to fall back to September-November 2020 levels ($400+/-50), but for now, I find that less likely and will stick to the standard 23.60-38.2% retrace for a 4th wave, just like I showed on the daily chart it has adhered to many times. Also, because in strong bull markets, and TSLA is clearly in one, upside surprises (like we experienced now) while downside disappoints.

Bottom line: Based on the EWP and technical analyses, I find TSLA to have currently less upside reward than downside risk for the intermediate-term (weeks-months), but still has long-term potential (months+).

Is A Significant Tesla Correction Imminent?
 

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Is A Significant Tesla Correction Imminent?

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Comments (16)
Steven Kilgore
Steven Kilgore Jan 16, 2021 10:04AM ET
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Thanks for the analysis, always love reading your articles. Personally I think Tesla (and most of the market) is now due for a good correction sometime in 2021.
Mats Tjernberg
Mats Tjernberg Jan 15, 2021 10:44AM ET
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For every arrogant reader and comment there is at least one who understands and sppreciates. Thank you!
Dr. Arnout ter Schure
Dr. Arnout ter Schure Jan 15, 2021 10:44AM ET
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thank you!
Candy Man
Candy Man Jan 15, 2021 4:55AM ET
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It has worked on tsla, go back and check some of the other analysis dr. Arnout has published and you will find the forrcast has mostly been right. Also to me it looks like tsla is fitting very well on the EW theory but just surprise on the upside, not all markets does that.
Dr. Arnout ter Schure
Dr. Arnout ter Schure Jan 15, 2021 4:55AM ET
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thank you! please don't confuse them with the facts, they have already made up their minds ;-)
Candy Man
Candy Man Jan 15, 2021 4:55AM ET
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Very true.
TL Chan
TL Chan Jan 15, 2021 3:56AM ET
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and why it will work this time!
TL Chan
TL Chan Jan 15, 2021 3:55AM ET
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This Elliott Wave thesis has never worked once for Tesla, I don't know you keep doing this thesis! If anyone want to apply E Wave thesis to Tesla, please tell me the reason it has not worked last time!
ELVIZ HotGaz
HotGaZ Jan 14, 2021 11:54PM ET
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Light years ahead of the competition, every car sold can drive itself (Musk), graphene will change the game and Teslas already working on it.  3000 miles a charge.
Big Daddy
Big Daddy Jan 14, 2021 10:38PM ET
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I’ve heard and read this for years. Short TSLA to show me the conviction all of you have.
Red Riley
Red Riley Jan 14, 2021 10:26PM ET
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I don't think Tesla is just cars. it is really about innovation and energy. crazy market value but maybe worth it. someone once told me roku was not worth 270 today it is over 400. don't miss the boat-- get on and enjoy the ride sometimes
Joel Schwartz
Joel Schwartz Jan 14, 2021 9:41PM ET
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TSLA is pricing in 2050 earnings at this point. They’re so ahead of themselves its sickening. 1/3 of their total number of vehicles sold this year were just issued a recall and they’re still up 700% on the year.
Luis Angulo
Luis Angulo Jan 14, 2021 8:20PM ET
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Tesla is a bubble. How Tesla shares could worth 40% of the whole automóvil industry?
Lonny S.
Lonny S. Jan 14, 2021 8:20PM ET
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Because its not a car company. Its an energy and utilities company
John Raymond
John Raymond Jan 14, 2021 7:39PM ET
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mfi is not a reliable trading or investment indicator. the stock is the lead bell weather for the entire market. therefore can only go higher if that's what the market is doing on all the mad stimulus
Franc Fil
Franc Fil Jan 14, 2021 7:37PM ET
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I agree TSLA is due for a big down thrust. I calculated the closing price Z-score based in a 360 day moving average and it is very high.
Bill Mmmmmmmmmm
willydick Jan 14, 2021 7:07PM ET
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we are way past technical analysis and indicators at this point.
Armando Gonzalez
Armando Gonzalez Jan 14, 2021 6:57PM ET
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eh, so buy more tesla, got it! 🤑
Sostain Shanzi
Sostain Shanzi Jan 14, 2021 5:22PM ET
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That sounds like a real analysis.
Candy Man
Candy Man Jan 14, 2021 4:23PM ET
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Thank you. Much appreciated.
 
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