Tesla approaches resistance around $712, potential bearish reversal seen

Technical Analysis:

Tesla has pulled back sharply as expected, from its $650 lows over the past few trading sessions. The tech stock has closed around $712 mark with potential bearish reversal seen ahead. It might have terminated lower degree wave ii and if correct, a sharp decline might unfold.

Tesla had earlier rallied towards $900 mark, its all-time highs. Since then, the stock has been unfolding lower and print $539 in March 2021. The proposed wave counts are as follows: Wave 1 might be marked around $539 since the drop from $900 was an impulse.

Tesla had subsequently rallied through $780 mark thereafter, sub dividing into three waves. It could be marked as Wave 2 corrective rally, which reached the fibonacci 0.618 retracement of Wave 1. If the above structure holds well, Wave 3 is heading lower since then.

Furthermore, Wave 3 might be unfolding as an extension with intermediary waves (i) and (ii) terminating around $545 and $729 levels respectively. High probability remains that a (iii) of 3^rd wave is in progress, which could be very sharp.

Traders might position themselves on the short side with potential targets towards $400 and $300 levels going forward. Ideally Tesla should stay below $780 resistance carved as potential Wave 2 for the above bearish structure to remain.

Prepared by

Finacademy Technical Team