TSLA Major Correction? Share your thoughts!
Updated
Today I decided to zoom out and look at the big picture. I was looking at the monthly chart of 
TSLA. I noticed that the current month is a green 8 on the TD sell setup, which means that next month is going to be the reversal signal. I imagine the candle of February to be red or a bearish pin bar (shooting star). Before I dive into the analysis, I want to make clear that I am long TSLA. Fundamentals have not changed. Tesla is going to be the biggest disruptor of the decade. What this analysis suggests is merely a correction. The scale of the correction might be too big. I measured it to be 38% at the smallest price range of the movement, and 49% at most. It is. no doubt. steep compared to the most recent correction of 34% in Sep 2020 which I marked in the chart above. Either way, TSLA is no stranger to these swings, so let's give it a deeper look.
I previously called a target for TSLA at $1050 which lies above the border of the broadening wedge. This target has not yet been achieved, so we're still in that long position. It's actually playing out as drawn (see related idea). From there, I see a breakout and going to new highs towards $2000 during 2021 as this image illustrates.
But seriously, how is it fun sailing up to $2000 without some bumpiness? Right? From where we are right now, a rise to $2000 makes a little more than 2X in terms of gain. But take it down a notch and correct to about $550 and then jack it up all the way to $2200; and you get the headline "Tesla climbs 4X in 3 months as more wall street shorts get liquidated!". Michael Burry will have exited his short of course. Oh and what would cause such a crash is perhaps another Tesla crashing into a police patrol while on full-self driving. Now that we imagined it, let's see it on the chart.
I drew two downward paths. Both are one-month long. The first starts after the $1050 target is reached. This will be the ultimate bull trap. Traders who sell at the top of the broadening wedge and would re-enter once price has broken above it are the ones that will eat the bull trap. The second path I drew starts after some consolidation along the next descending resistance line. Notice these parallel dotted descending lines. I estimated the next one using Fibonacci. So the idea of the second dotted path is that price gets squeezed between the descending trend line and the ascending top of the broadening wedge. At that point, I know that I will be in so much doubt whether price will plunge downwards from that squeeze or explore upwards. We'll just have to keep collecting clues to favor one bet over the other.
The target of both paths is the bottom of the broadening wedge. In my estimation, if this correction happens, this will be the bottommost point for TSLA onwards.
For the stop loss, you will have to keep watching this idea as I update it, because I can't decide a stop loss yet; except I would loosely say it's the descending trend line that price action will decide. We have to wait and see a bearish reversal signal such as a shooting star candle or a higher high in price coinciding with a lower high in RSI.
In conclusion, I have to make clear a few points:
TSLA. I noticed that the current month is a green 8 on the TD sell setup, which means that next month is going to be the reversal signal. I imagine the candle of February to be red or a bearish pin bar (shooting star). Before I dive into the analysis, I want to make clear that I am long TSLA. Fundamentals have not changed. Tesla is going to be the biggest disruptor of the decade. What this analysis suggests is merely a correction. The scale of the correction might be too big. I measured it to be 38% at the smallest price range of the movement, and 49% at most. It is. no doubt. steep compared to the most recent correction of 34% in Sep 2020 which I marked in the chart above. Either way, TSLA is no stranger to these swings, so let's give it a deeper look.I previously called a target for TSLA at $1050 which lies above the border of the broadening wedge. This target has not yet been achieved, so we're still in that long position. It's actually playing out as drawn (see related idea). From there, I see a breakout and going to new highs towards $2000 during 2021 as this image illustrates.
But seriously, how is it fun sailing up to $2000 without some bumpiness? Right? From where we are right now, a rise to $2000 makes a little more than 2X in terms of gain. But take it down a notch and correct to about $550 and then jack it up all the way to $2200; and you get the headline "Tesla climbs 4X in 3 months as more wall street shorts get liquidated!". Michael Burry will have exited his short of course. Oh and what would cause such a crash is perhaps another Tesla crashing into a police patrol while on full-self driving. Now that we imagined it, let's see it on the chart.
I drew two downward paths. Both are one-month long. The first starts after the $1050 target is reached. This will be the ultimate bull trap. Traders who sell at the top of the broadening wedge and would re-enter once price has broken above it are the ones that will eat the bull trap. The second path I drew starts after some consolidation along the next descending resistance line. Notice these parallel dotted descending lines. I estimated the next one using Fibonacci. So the idea of the second dotted path is that price gets squeezed between the descending trend line and the ascending top of the broadening wedge. At that point, I know that I will be in so much doubt whether price will plunge downwards from that squeeze or explore upwards. We'll just have to keep collecting clues to favor one bet over the other.
The target of both paths is the bottom of the broadening wedge. In my estimation, if this correction happens, this will be the bottommost point for TSLA onwards.
For the stop loss, you will have to keep watching this idea as I update it, because I can't decide a stop loss yet; except I would loosely say it's the descending trend line that price action will decide. We have to wait and see a bearish reversal signal such as a shooting star candle or a higher high in price coinciding with a lower high in RSI.
In conclusion, I have to make clear a few points:
- I would never recommend shorting TSLA. TSLA has much much more room to the upside than it has to the downside. TSLA is much much more likely to see $2000 from here than it is to see $400. So shorting is a BAD idea.
- This is merely a warning with the goal that you make sure you are not too leveraged, that you prepare mentally before a correction happens, that you do not panic if it does happen, and that you prepare to add to your position at the bottom. TSLA is a long term investment for the coming decade. It is not a trade.
- This is one of those calls that I'm only publishing for fun and learning, and to entice thought and have some of your opinions. So please leave your opinion in the comments.
Note
The recent 13% correction changes a lot. It defines lows and strengthens support levels. More importantly, it completely cancels my idea of a major correction coming in February or March. I will have to make a new idea for TSLA, but in short, I see that TSLA will climb so much in the next two months that the next major drop will take us to $1135 at the top of the broadening wedge and likely somewhere in Arpil to June.
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