Technical Update - Tesla testing key support in bubble implosion scenario Technical Update - Tesla testing key support in bubble implosion scenario Technical Update - Tesla testing key support in bubble implosion scenario

Technical Update - Tesla testing key support in bubble implosion scenario

Equity 4 minutes to read
KCL
Kim Cramer Larsson

Technical Analyst, Saxo Bank

Since Tesla shares took off back in 2020 the share price has formed a classic bubble formation. With shareholders having lost 50% since peak there could be more agony ahead.
Taking out key support around current level is likely to fuel another heavy sell-off to price levels not seen since 2020 i.e., 30-45% lower from here  

Tesla is trading lower Pre-Market this morning currently 5% down an indicated opening around $211 which is close to the support at around 208. A support that was broken last week confirming the downtrend Tesla has been trading in since it broke below 265.
A down trend, illustrated by the falling wide channel lines i.e., lower highs and lower lows, that could take Tesla much lower.
A break below last week’s low at 204 is likely fuel another heavy sell-off. A sell-off that can take Tesla to test the strong support around 180.


Source: Saxo Group

For Tesla to reverse the medium-term down trend a close above 314.67 is needed.
Short-term a correction up to around 246 could be seen if Tesla closes above 229.82. RSI is showing negative sentiment on both daily and weekly supporting the view of lower price levels.
No divergence on daily RSI.

Source: Saxo Group
Looking at a monthly chart going back to when Tesla was listed on the Exchange Tesla is showing a clear Bubble pattern. During the bubble build-up there are at least one but sometimes two larger corrections called Bear traps or Pre-peaks.
When the price starts to decline i.e., when the bubble implodes the price always comes down to at least the last pre-peak low but quite often down to the first pre-peak.
Sometimes the price comes all the way down to the base level before prices really takes off - see Bubble chart at the end of this article. (During the Tech bubble implosion back in 2001-2003 Nasdaq dropped below its pre-peak low).

All the signs of top and reversal were in place leading to the sell-off. RSI divergence warning about an imbalance and weakening of the uptrend, declining volume since mid-2020 and finally the Doji Evening top and reversal pattern.

Currently Tesla is trading close to the lows of the Pre-peak 2. If prices drop below the lows of that pre-peak/correction Tesla is likely to drop down into Pre-peak 1 area and test the Fibonacci 0.618 retracement of the all-time low and all-time high just below top of the pre-peak 1 area at 158.95.

Source: Saxo Group
Typical Bubble Pattern
Source: Saxo Group

Note: The author is holding a short position in Tesla

Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.