Technical Analyst, Saxo Bank Group
With a lower close yesterday Tesla further confirmed its down trend on both longer- medium- and short-term i.e., daily, weekly and monthly chart. With the lower close Tesla closed below key support at $180 – see weekly chart.
The share price has almost reached 0.618 retracement of the entire uptrend since 2019 low at around 165.63. However, there is more downside in the cards. The 0.618 retracement at 165.63 is not a strong support.
The upper level of the consolidation area back in 2020 around 154.57 will offer stronger support and the 200 weekly SMA will also provide some support.
However, Tesla could drop to the lower levels in that support area i.e., down to around 118-110 going into 2023.
Tesla is a bubble that is imploding. During a bubble build up there is at least one, but sometimes two larger corrections called Bear traps or Pre-peaks. Tesla is now trading below the second pre-peak.
The top was in place back in December 2021 with an Evening Doji pattern (mentioned in previous Tesla analysis).
The theory of bubbles, and what almost always occurs, is that the price comes back down to the first pre-peak but very often all the way down to the base. See chart 4 for Nasdaq from the .com bubble.
If that scenario plays out this time too Tesla is likely to drop to at least 110 possibly lower in 20232.
There is no RSI divergence on weekly supporting the bearish picture but a possible divergence on daily. Also on daily chart a possible falling wedge is being formed. An RSI divergence and a break of the upper falling trend line in the wedge could initiate a short-term rebound.
However, to reverse this bearish scenario Tesla needs to close above 237.40. However, that would only reverse it short- to medium-term. To reverse the longer-term down trend a close above 314.70 is needed.
RSI divergence explained: When instrument price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend
The Author of this analysis is holding a short position in Tesla
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