Tesla (NASDAQ: TSLA) advances in a corrective structural series that could correspond to a Regular Flat Pattern.
Tesla’s big picture under the Elliott wave perspective exhibits the price movement running in an incomplete corrective formation, which began last February 04th, when the price topped at $968.85 per share.
TSLA, in its 4-hour chart and log scale, illustrates the completion of an upward impulsive wave, which started in early June 2019, when the price found fresh buyers at $177.01 per share and ended at $968.85 a share in early February 2020.
In the figure, we distinguish that the price of this vehicle manufacturer developed its impulsive sequence as an extended fifth wave of Minor degree labeled in green. In the same way, we recognize that the third wave is not the shortest, which complies with the Elliott wave rule that states, “a wave three will never be the shortest.”
Once the motive wave had been completed, TSLA started to experience a corrective movement of the same degree against the previous bullish wave. The first decline identified as wave A in green fell over 95% of the advance of wave 5, complying with the rule defined in the textbook that in a fifth extended wave, a wave A will never retrace the fifth wave’s progress entirely.
The first corrective movement corresponding to wave A of Minor degree ended at $350.70 per share on March 18th, where the price found fresh buyers that drove TSLA toward a new lower high. In the previous figure, we observe that Tesla found resistance at $869.17 per share, converging with the zone of 81% of wave A. This relationship drives us to conclude that TSLA should be developing a Regular Flat Pattern.
According to the Elliott wave theory, a flat pattern is a corrective formation that follows a 3-3-5 structure. Therefore, the next path should correspond to wave C, which should advance into a five-wave sequence. On the other hand, the RSI oscillator shows a consolidation formation below the 60 level, which makes us observe that TSLA moves in a resistance zone. A breakdown of the current intraday ascending channel could activate the bearish continuation in the following trading sessions. Finally, within the wave C completion, Tesla will end a complete cycle, and a new bullish cycle of the same degree should start.
To conclude, our short-term bias remains on the bearish side until the wave C completion. Once this bearish path ends, we will seek for long-side positioning.