Tesla (TSLA) Hovers Around Major Support Looking For Imminent Direction
Charts created by writer from C Trader
In this article, we will look at how Tesla (NASDAQ:TSLA) is reacting around its major support region of $709 and whether a move higher towards its wave two high or a break below its current low may be imminent.
Third waves can be complex. Sometimes they can go to target without issue, sometimes they can retrace past their wave two high/low before completing their path. Sometimes they continue past their target and, of course, sometimes they fail.
Tesla is currently in a third wave potentially to $176, if the third wave were to numerically replicate wave one. There is no crystal ball for Tesla’s future movement, just a chart with evidential price action.
So how is Tesla’s third wave southwards going? Well, Tesla has immediately bottomed at $620 on the monthly chart and has found rejection above support of $708 at $792. This week could go some way to telling us whether Tesla wants to push higher towards the highs of its wave two at $1153 by breaking above the rejected $792 region. Alternatively, a retreat to the $620 low will open another immediate door to new lows in its third wave.
Tesla will not exit this third wave structure to $176 until it breaks above the high of $1242 before touching $176. This, of course, is entirely possible, and we will know more about Tesla’s directional plans in the coming weeks. We may find out if Tesla wants to hold above macro support at $709 and distance itself further from its macro third wave and make a three wave weekly pattern towards the wave two highs of $1153 or break below support leading to a further breakdown towards potentially $176.
: In the monthly chart below, we can see a wave one from the high of $1242 to $709.
: We can then see a wave two $709 to $1153.
: A third wave has technically broken by the drop below the $709 region with a target of $176 if wave three was to numerically replicate wave one.
Now, we can examine the internals of the structure by moving backwards to the weekly chart. We can see a bottoming at $620 with a rejection candle at $792. While not an ideal rejection candle with very little wick action, it is nevertheless a rejection candle that, if broken above higher at $792, can lead to a challenge for the wave two high region of $1153.
If we look at the wave two from $1153, we can see it hasn’t been re-traced into. The price dropped with intent from that region, so the coming weeks will print more information as to its next move. To summarize, Tesla is still in a third wave to $176 if wave three was to replicate wave one. I would expect Tesla to potentially hit this target in the next 90-120 days with Tesla now due to confirm whether it wants to head higher into its wave two first or go straight for its previous low of $620.
The three wave theory was designed to be able to identify exact probable price action of a financial instrument. A financial market cannot navigate its way significantly higher or lower without making waves. Waves are essentially a mismatch between buyers and sellers and print a picture of a probable direction and target for a financial instrument. When waves one and two have been formed, it is the point of higher high/lower low that gives the technical indication of the future direction. A wave one will continue from a low to a high point before it finds significant enough rejection to then form the wave two. When a third wave breaks into a higher high/lower low, the only probable numerical target bearing available on a financial chart is the equivalent of the wave one low to high point. It is highly probable that the wave three will look to numerically replicate wave one before it makes its future directional decision. It may continue past its third wave target, but it is only the wave one evidence that a price was able to continue before rejection that is available to look to as a probable target for a third wave.