cnkj shared · 3 hours ago

A classic example of why new traders should not FOMO into parabolic stocks especially Tesla. Such stocks are not for the inexperienced.

$Tesla (TSLA.US)$ Here’s my personal take on where likely we can expect a bounce/bottom based on TA.

There are so many indicators pointing towards a confirmed reversal, Elliott Wave, KDJ, Hanging Man, Evening Star. The list goes goes. Indicators are literally flashing red now. I wrote a piece on that.

Read: I’m shorting Tesla but I’m not here to hate. I trade based on TA, and I don’t need you to lose money for me to see green. So, I’m sharing the risks around buying this dip.

So, where do we see the bounce?

We need to look into the historical price action to understand where we can expect a bounce. In previous parabolic rallies, the RSI1 would need to take a steep plunge from the 90s to the range 20-40 on the daily candle before a bounce is seen.

We have now corrected to the range of 50 from 90 so we may expect a little more red to go. On a downtrend, Tesla trades with RSI1 between 80 and 20, so you can effectively take these as entry or exit points.

In my personal opinion, we can find an interim bottom at around $410, where the previous ATH will act as strong support and it’s within the RSI ranges mentioned above.

Remember, lots of traders will take any bounce as a chance to exit so the price action will probably consolidate around these levels before deciding on the next move. It would be unlikely for another parabolic rally to happen whilst market digests. Tesla needs to hold these levels.

Worse case if TSLA broke below previous ATH, where can we safely expect the bottom reversal to be?

It’s hard to say, Tesla, much more than other stocks are erradic and harder to read.

A logarithmic measurement, consisting of up and down waves will lead us to roughly a 39% correction from the top in a longer time frame, would bring us down to the 290 - 310 range but I don’t see this happening in a short time span, probably a move up from 410 before headling lower. Again, I’m only reading where the chart points.

For me, I’ll be comfortable to enter if Tesla does hit the previous psychological highs of $270, which again I dont see it happening in a short span of time.

There are other better stocks to buy now. I’m personally heavily invested in $NVIDIA (NVDA.US)$ $Micron Technology (MU.US)$ based on the oversold conditions and the market rotation i called earlier this week.

Nonetheless, have a good weekend and Merry Christmas traders!