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Tesla Down On Stellar Earnings: What Is Wrong With This Stock?

By Dr. Arnout ter Schure Stock MarketsJul 23, 2020 02:42PM ET
www.investing.com/analysis/tesla-down-on-stellar-earnings-what-is-wrong-with-this-stock-200531704
Tesla Down On Stellar Earnings: What Is Wrong With This Stock?
By Dr. Arnout ter Schure   |  Jul 23, 2020 02:42PM ET
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To answer the question from the title: Nothing is wrong with Tesla (NASDAQ:TSLA), and I think it can still fly higher. It is simply digesting some of its recent astronomical gains. Allow me to explain using Elliott waves.

Figure 1 below shows the weekly chart of Tesla. I know it is a busy chart, but there are several key takeaways from it. Let me start with the technical indicators.

1) four out of five prior times Tesla was this overbought on the weekly RSI5, Money Flow Index, and Stochastic oscillator it corrected (vertical lines). Tesla is now as overbought and correcting.

2) The Elliott wave count I have for Tesla is that it is now in (red) intermediate-iii of (black) major-3 of (blue) Primary III/C of (purple) Cycle-3/C.

Why do I label the more significant degrees as numbers (five waves up) and letters (three waves up)? I must remain intellectually honest because I cannot know beforehand if Tesla will move higher in five or three larger waves. This unknown is the blessing and the curse of Elliott wave. The blessing, because if price at some point drops below a specific price level, we know it will only do three waves up. If it does not fall below it, and moves higher, then it will be five waves. One can use that certain price level as a stop. The curse, because from a buy-and-hold perspective, you do not know beforehand when the music will stop playing. But that is why one must always use stops anyway.

Figure 1, weekly chart.

That said, Tesla should now be in (red) wave-iv before moving higher for (red) wave-v to complete the anticipated “wave-3?”

The daily chart, with price action over the last six months, in Figure 2 below shows more detail.

The Elliott wave count since the mid-March low took a while to crack, but in the end, it aligned perfectly with the wave count shown on the weekly chart. I, therefore, prefer to see Tesla target ideally between $1,369-$1,320 for wave-iv before moving higher to new All-time Highs (ATH) for wave-v of 3. The rally over the past seven trading days was overlapping and, therefore, counts best as a (green) b-wave. Now, wave-c of wave-iv should be underway. Note Tesla could even drop as low as $1,106-$1,093 for wave-iv without any issues. This drop would fil the early-July gap.

Bottom line: There is nothing wrong with Tesla and its stock. In my humble opinion, based on technical analyses and Elliott wave, it is correcting before moving higher again. The correction should ideally stall around
$1,370+/-50 but could drop as low as $1,100+/-5. A move below that lower level will be a serious warning for the bulls that the odds for more upside are getting very slim. Thus, as usual: know your trading time frame, know your pain level, and never assume anything. Hope is not a profitable strategy.

Figure 2, daily chart

 

Tesla Down On Stellar Earnings: What Is Wrong With This Stock?
 

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Tesla Down On Stellar Earnings: What Is Wrong With This Stock?

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Comments (14)
Momentum Tradarn
Momentum Tradarn Jul 26, 2020 9:54AM ET
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159577161172773.jpg
Under trend line.
Momentum Tradarn
Momentum Tradarn Jul 26, 2020 9:47AM ET
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Thanks! Why not iii and iv already at the top and bottom end of June? And the v at ATH?
Momentum Tradarn
Momentum Tradarn Jul 26, 2020 9:47AM ET
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Thanks. Why not iii and iv in June/beginning July and the v at ATH?
Jörg Holl
Jörg Holl Jul 24, 2020 2:58AM ET
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Elliott wave theory still exists? In the 90th Bob Prechter always made false prognosis with that.
Jan Skilbrei
Jan Skilbrei Jul 24, 2020 2:07AM ET
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tesla, all good priced in for future. other brands will catch up, to provide many different designs, solutions, for the custumers. Japanese, European engineers, it, will provide competition, of cource
Kyung Ho Bruletti
Kyung Ho Bruletti Jul 23, 2020 10:27PM ET
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So.. bottom line: it will go down and then it will go up....
Bat Man
Bat Man Jul 23, 2020 10:08PM ET
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Elliot wave your money goodbye. It’s pseudo-TA.
Tom Jones
Tom Jones Jul 23, 2020 9:44PM ET
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Tesla is AAPL 20 years ago. Cars, solar, batteries and all its IP are incredibly valuable to society, even if its IP shows how NOT to design an electric vehicle. Let’s face it, no one knows how to price the stock, but it’s fun to watch.
Jan Skilbrei
Jan Skilbrei Jul 23, 2020 9:44PM ET
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yes, Tesla was 8 years ago. Its already very expensive, priced in that all good will happen. In Norway, the other brands of ec, is taking marked shares from Tesla, fast. as with normal cars, many different brands, will provide many different designs, solutions. you think eg Toyota will not catch up?
James Wellington
James Wellington Jul 23, 2020 9:15PM ET
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I'm going to join the sentiment here. I don't have a position, but I can't wait to see the smirk wiped off of goofy Elon's fraudulent face, and every Tesla bull that held through this. Tesla is a banana republic mess.
Dr. Arnout ter Schure
Dr. Arnout ter Schure Jul 23, 2020 6:52PM ET
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so far I am only seeing (negative) opinions, and 0 facts on why TSLA stock should be lower. Meanwhile, the stock is higher because it follows and Elliot wave impulse wave. Opinions are for cocktail parties, trading, and investing use cold, hard facts: price data. The Eliott wave is leading the way, never opinion.
Jeremy Williams
Jeremy Williams Jul 23, 2020 5:14PM ET
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Please this stock is way overpriced and everyone knows it. Stop with the useless articles on Tesla.
Mark Jew
Mark Jew Jul 23, 2020 5:01PM ET
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People forget that TSLA is held hostage by the Chinese government now.
Invest Right
Invest Right Jul 23, 2020 3:26PM ET
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Scam of a company and fraudulent accounting and reporting. But let me "explain this using elliot waves". LOL. Get outta here!
Mark Jew
Mark Jew Jul 23, 2020 3:26PM ET
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I'd say products are legit, but no doubt accounting is incredulous. People are betting on the hope that the company will turn around before the owner is locked in jail.
George Roshtein
George Roshtein Jul 23, 2020 3:04PM ET
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lol stellar.. do you even understand how they make profit? with selling green credits, not by selling cars... do your research man. also sp500 was priced in from $900-$1600. how long are you in business? also over 1000PE doesn't really mean, as this was pre pumped due to hype..
 
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