Tesla extends potential Wave 2 around $875

Technical Analysis:

Tesla has extended its rally beyond $820-25 zone and prints high around $875 on Monday. The tech stock rallied sharply through the above mark but stays below $900 resistance. Bears manage to keep the structure inclined lower towards $400 and further.

Tesla had dropped from $900 highs through $539 earlier, subdividing into five waves, labelled as Wave 1 on the 4H chart here. Ideally, an impulse wave is followed by a corrective wave in the opposite direction.

Tesla has produced a counter trend rally since $539 lows, subdividing into three waves a-b-c, towards $875 levels. It is marked as potential Wave 2 on the chart here. Which has exceeded the fibonacci 0.786 retracement of Wave 1.

Tesla has unfolded its Wave 2 as a Standard flat (3-3-5) correction until now. If correct, prices should stay below $900 mark and turn sharply lower towards $400 levels at least. The wave structure is presenting a classic Elliott Wave pattern (5-3) between $900 and $875 mark.

Tesla bears would be back in control anytime soon, dragging prices below $750-60 mark, which is initial support. If Wave 3 progresses lower from here, the tech stock could witness its biggest and steepest drop towards $400 levels.

Prepared by

Finacademy Technical Team