Tesla is either carving lower degree wave (ii) within Wave 3 lower or primary Wave 2 is still unfolding as a triangle. Either way, the stock price is expected to stay below $780 to keep its bearish count intact. Downside potential remains toward $400 mark, going forward.
Tesla had rallied toward $900 highs before reversing lower. Its drop between $900 and $539 was an impulse, which subdivided into 5 waves, labelled as primary Wave 1 on the chart here. Ideally an impulse drop is followed by a corrective rally, subdividing into 3 waves.
The tech stock produced a corrective wave toward $780 mark, labelled as primary Wave 2 here. Since then, the stock has been carving lower degree waves (i) and (ii) as Wave 3 progresses lower. Alternatively, primary Wave 2 could be unfolding as a triangle.
An extended Wave 3 or triangle Wave 2, Tesla should ideally stay below $780 resistance to keep the bearish count intact. A push above $780 would indicate that Wave 2 unfolded as a flat and that Wave 3 would resume thereafter.
Traders might want to initiate fresh short positions against $780 for now, with potential target toward $400 and $300 in the coming weeks.
Finacademy Technical Team
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