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Tesla Reached $600: What’s Next?

By Dr. Arnout ter Schure Stock MarketsDec 01, 2020 04:59PM ET
www.investing.com/analysis/tesla-reached-600-whats-next-200546482
Tesla Reached $600: What’s Next?
By Dr. Arnout ter Schure   |  Dec 01, 2020 04:59PM ET
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In my two recent articles about Tesla (NASDAQ:TSLA), see here and here, I alerted to the fact it had “completed a larger 4th wave as a (tricky) triangle” and that it “can now move higher to ideally $535-550, possibly as high as the low $600s to complete wave-5 of larger wave-III/C.”

It then reached the 1.618x Fib-extension at $509, a typical 3rd wave extension target, and I was looking for “a smaller (red) wave-iv [correction] to ideally $480-465 before moving higher to at least - and ideally - $535+. It can move to $600+ as well if red wave-v decides to extend.” It only bottomed at $489 that day, which suggests it was not a (red) wave-iv, but a smaller degree 4th wave: the current 3rd wave (red wave-iii) is thus extending. Wave-extensions can always happen and must ever be anticipated but can never be known with certainty beforehand.

But all that is beside the point. What matters is Tesla reached the (lower) Elliott Wave Principle (EWP) target (grey arrow) and then reached the (blue) bull flag upside target. Thus, my first article from Nov. 17, when trading in the low- to mid-$400s, was correct. It outlined a maximum downside risk of around $50 and a minimum upside potential of $100. Now that these targets are reached, the logical question is: what’s next?

I expect Tesla to digest some of its gains short-term, with 1st support at $550 +/- 5. Below that sits support at $525 +/- 5, and 3rd support is $490 +/- 5. I do not want to see Tesla move below this last level of support or jeopardize the EWP count I am tracking. As long as these levels hold, I expect a final rally (red wave-v) to the mid-600s before this move from the (black) major-4 low, made on Oct. 30, completes. See Figure 1, left chart.

Figure 1:

Tesla Daily And Monthly Candlestick Chart With EWP Count.
Tesla Daily And Monthly Candlestick Chart With EWP Count.

After that, we should see a very sizeable correction as the monthly chart, Figure 1, right chart, shows Tesla will then have completed five larger (green) waves from the mid-2019 low: orange arrow. And after five waves up, always - at least - three waves down will follow. That is the certainty of the EWP. Besides, negative divergence on the monthly RSI5 and Money Flow Indicator is creeping in (red arrows). These are highly reliable indicators foretelling of a pending large (multi-month) correction. The lower MFI is especially concerning as it means less money is flowing into the stock currently. And it is liquidity that drives markets. If liquidity, i.e., buying power, dries up, stocks will eventually succumb to selling pressure: all are part of the natural ebb and flow of assets. But for now, let’s focus on the pending pullback and subsequent rally first. Once support and new upside targets are reached, it is time to re-assess the current thesis of a looming, more extensive correction.

Tesla Reached $600: What’s Next?
 

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Tesla Reached $600: What’s Next?

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Comments (9)
Roopeshakumar Shalgar
Roopeshakumar Shalgar Dec 18, 2020 8:42PM ET
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👍awesome, Tsla just crossed one more high!
Momentum Tradarn
Momentum Tradarn Dec 09, 2020 5:09PM ET
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160755174022068.jpg
Picture.
Momentum Tradarn
Momentum Tradarn Dec 09, 2020 5:02PM ET
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I think wave v in the 5th is ready.
Momentum Tradarn
Momentum Tradarn Dec 07, 2020 9:51AM ET
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621 dollar so far today, and short on shorts, a sign? https://www.marketwatch.com/story/a-shortage-of-short-shorts-leaves-tesla-fans-frustrated-11607290931?mod=mw_quote_news
Candy Man
Candy Man Dec 02, 2020 12:57PM ET
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Great analysis. Will be interesting to follow and look forward to the 3 correction waves....
Dr. Arnout ter Schure
Dr. Arnout ter Schure Dec 02, 2020 12:57PM ET
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thank you
Buffett Advisor
Buffett Advisor Dec 01, 2020 9:14PM ET
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Elon family selling tesla bubble
Dr. Arnout ter Schure
Dr. Arnout ter Schure Dec 01, 2020 9:14PM ET
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nope... it is traders and investors who buy and sell stocks that drive prices. nobody puts a gun, especially not Elon in this case, against their heads to do that. it's all voluntary.
Franc Fil
Franc Fil Dec 01, 2020 9:02PM ET
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Biggest bubble stock of all time.
Dr. Arnout ter Schure
Dr. Arnout ter Schure Dec 01, 2020 9:02PM ET
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that's just opinion, can't trade that.
Franc Fil
Franc Fil Dec 01, 2020 9:02PM ET
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Dr. Arnout ter Schure  - when/if it has a runaway gap day on heavy volume, I will gladly short it. It is now valued higher than 9 OEM companies combined.  This is absurd.  TSLA has no real patented proprietary competitive advantages and companies like Toyota and GM are introducing dozens of models over the coming years.  Very good call on your part for the momentum and price action.  Kind Regards
Roopeshakumar Shalgar
Roopeshakumar Shalgar Dec 01, 2020 7:14PM ET
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Dr Arnout, great analysis. if I need to read books or other sources about TA, can you mention them with rankings?
Dr. Arnout ter Schure
Dr. Arnout ter Schure Dec 01, 2020 7:14PM ET
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thank you! Unfortunately, I can't. That would come across as endorsing, but please start with Prechter and Frost Elliott wave principle. You can also read my own book "tomorrow happened yesterday"
Roopeshakumar Shalgar
Roopeshakumar Shalgar Dec 01, 2020 7:14PM ET
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Thank You Very Much!
Fabio falec
falec Dec 01, 2020 5:33PM ET
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Great TA, well done!
 
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