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Is Tesla's Dead-Cat Bounce Heading To Mid-400s?

By Dr. Arnout ter Schure Market OverviewMar 10, 2021 02:46PM ET
www.investing.com/analysis/is-teslas-deadcat-bounce-heading-to-mid400s-200566409
Is Tesla's Dead-Cat Bounce Heading To Mid-400s?
By Dr. Arnout ter Schure   |  Mar 10, 2021 02:46PM ET
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One month after I last provided an update on Tesla (NASDAQ:TSLA), where I was looking for $575 to be reached, the stock dropped to as low as $537 last week and is now trading at $650s. The stock took a 40% haircut since the all-time high was struck in January. Although my downside target was reached, the way Tesla reached it was not entirely according to plan and suggested the rally off last week’s low is only a dead-cat bounce before the next leg lower starts. Well, the cat is not dead, but very much alive as it has nine lives.

Let me explain below.

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

Tesla Daily, Weekly Candlestick Chart With EWP Count.
Tesla Daily, Weekly Candlestick Chart With EWP Count.

The daily chart shows the decline from the all-time high to last week’s low counts per the Elliott Wave Principle (EWP) best as five waves down (red i, ii, iii, iv, v). Therefore, the current rally is likely part of a larger multi-day bounce to ideally $825+/-25 before the next leg lower kicks in. Last week’s low was (black) major-a, the current “dead-cat-bounce” major-b, followed by a major-c down to ideally around $450+/-25. The overall larger pattern would then be, what is called in EWP terms a zig-zag (see here): a price-pattern made up of five waves down (major-a) completed, three waves up (major-b) under way, followed by another five waves down (major-c) to finish (blue) Primary-IV.

The three waves up are currently in progress, and the first wave has likely completed (red wave-a). The second wave is now under way (red wave-b) to ideally $625+/-25, from where the next move higher (red wave-c) should kick into ideally $825+/-25 for a typical wave-C=wave-A relationship. That targets around the 76.40% retrace of the last decline as well as into the horizontal resistance zone.

The weekly chart shows Tesla has already reached and exceeded the typical 38.20% retrace level of around $570. That suffices for a 4th wave of the (blue) primary degree. Thus, my EWP count on the daily chart could be wrong, and Tesla could already have completed the Primary-IV. A daily close above $850 will go a long way to confirm this thesis. It is, however, for now, not my preferred EWP count.

Bottom line: Regardless of Primary-IV is already complete or not, I now prefer to look higher for Tesla and reach ideally $825+/-25. From there, I expect the next decline to ideally $450+/-25. It will be confirmed on a close below the recent $537 low after $825+/-25 has been reached. Thus, from a trading perspective, one can long Tesla and raise stops accordingly as it moves towards the bounce target zone while taking partial profits along the way. If Tesla decides $537 was all of wave-IV anyway, then one has caught the right bus already and can ride it all the way higher to the low to mid-1000s.

Is Tesla's Dead-Cat Bounce Heading To Mid-400s?
 

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Is Tesla's Dead-Cat Bounce Heading To Mid-400s?

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Comments (9)
Việt Ông Văn
Việt Ông Văn Mar 12, 2021 12:48AM ET
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Thanks Dr. Arnout. Can you analyze Sea Limited stock price?
Ronald Warren
Ronald Warren Mar 11, 2021 7:14AM ET
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Two options. 1) Tesla goes to $1,000's. 2) Tesla drops to $450. I'm still in the dark. Someone throw me a flashlight.
Andrew Bevan
Andrew Bevan Mar 11, 2021 7:14AM ET
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Well put. Yet, I think the argument may be that Tesla 'may not' be finished on the downside and that $450 would be your best entry. The continued downside risk in a ongoing movement is something you 'might' want to take into consideration.
Candy Man
Candy Man Mar 11, 2021 7:14AM ET
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What you can do now is wait for the sell signal on 1 hour to daily chart to form and then short..
Andrew Bevan
Andrew Bevan Mar 11, 2021 2:55AM ET
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Yet another interesting piece to a complex puzzle. Maybe indices will agree and form a peak upon the beginning of next week.
Albert Robinson
Albert Robinson Mar 11, 2021 12:27AM ET
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Seems to cover all his bases
Gene Kret
Gene Kret Mar 10, 2021 10:42PM ET
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Hey Witch Doc, stop with your snake oil.... you sound like Fauci...TSLA will be at $900 by the end of the month. Start reading Cathie Wood maybe you will learn something.
Chris Poulos
Chris Poulos Mar 10, 2021 9:45PM ET
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tesla will definitely be worth several thousand dollars very soon. everyone on earth should buy as much of it as they possibly can. immediately!
Zsombor Komán Birtalan
Zsombor Komán Birtalan Mar 10, 2021 9:45PM ET
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hé has longs ín Tesla
Andrew Bevan
Andrew Bevan Mar 10, 2021 9:45PM ET
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Everyone on Mars, too, by the sound of things! :D
Ram Ch
Ram Ch Mar 10, 2021 8:26PM ET
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Not sure if @Dr. Arnout is reading our comments :)
Momentum Tradarn
Momentum Tradarn Mar 10, 2021 8:26PM ET
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Hope not. His analysis are worth do much more.
Eddy van Dorst
Eddy van Dorst Mar 10, 2021 5:40PM ET
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Its not tesla that gona bee the big player but VW or Ford
Ron Love
Ron Love Mar 10, 2021 5:40PM ET
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Tesla has the battery advantage until 2030 and the batteries are the most coatly part of an EV. Tesla also has a massive advantage over everyone on quality miles data. Waymo/Google has around 25 million quality miles of data but Tesla has 15 billion. Tesla’s lead is gigantic.
Ron Love
Ron Love Mar 10, 2021 5:40PM ET
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You should study the S curve adoption rate and how it correlates earnings-wise to the first mover company in a disruptive technology.
mike mike
mike mike Mar 10, 2021 5:40PM ET
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Tesla is an overpriced, overrated company that is only staying afloat because of EV credits, a CEO with a cult following and liquidity from stock dilution. EV will be a gradual process and eventually the house of cards for this stock will fall hard.
Candy Man
Candy Man Mar 10, 2021 4:56PM ET
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Spot on, thank you. Good timing for this one too.
 
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