Tesla is in an uptrend from a macro perspective, following a diagonal line that has served as support several times in the past. The stock has exhibited relatively regular price action between accumulation, expansion, and distribution:
1- The first accumulation period ranged between $0.9987 and $2.66 and lasted 834 days. This was followed by an expansion period between October 2012 and September 2014, during which the price surged by 984% to $19.43.
2- The subsequent distribution after the expansion occurred over the next year and a half, leading to a correction of approximately 51% to $9.40 per share. The price then accumulated from February 2016 to June 2019 in a range between $9.40 and $25.97, finding support again at the diagonal line in a new correction of 54%. After finding support at the diagonal line, the price surged to achieve a 3434% gain over the next two years, reaching $414.5 per share.
3- The all-time high (ATH) was then reached in November 2021, and since then, the price has been in a distribution period during which it has depreciated by 75% from the peak.
The question to ask is until when and to what extent could Tesla's stock correct?
The diagonal line where the price found support more than once is still somewhat distant. The price could either reach it in the short term by falling there or it could start accumulating in a range, trading sideways until it finds the trendline again somewhere around 2027.
Looking at the price action since the ATH:
The price has been fairly offered since the ATH, not leaving behind significant liquidity zones. Since the ATH, we see how the price has begun to respect bearish arrays and violate bullish ones. In the only significant retracement since the ATH, the price showed weakness, continuing to respect the bearish arrays and reacting in liquidity zones with algorithmic confluences. After this lower high and this lack of strength from the price to break through the bearish arrays, the continuation of the downtrend is favored.
Okay, so we expect a continuation of the price downwards, but to what levels?
The trendline alone doesn't provide support, although it may have a psychological component for traders. The liquidity zones that provide counterparty liquidity to the price near this line are the levels we're looking for. Therefore, we have a recent lower low that hasn't been taken yet. We also have a VPVR zone that stands out to us and represents a zone of a monthly Fair Value Gap. The FVG also has a confluence with the 0.5 retracement of the last uptrend movement. The two mentioned liquidity zones are not far apart from each other, so we expect a price reaction in the range between $70 and $101.9. We'll have to see later if the reaction in this zone is significant and, if so, evaluate over time whether it's a retracement or a price reversal.
Historically, Tesla has never retraced to the 0.5 retracement level of expansion movements.
This could be a good opportunity if the price reacts there.
Another interesting perspective is comparing Tesla to the NASDAQ:
As we can see in the image below, in June 2019, the price not only touches the diagonal trendline but also reaches the 0.5 retracement level of the previous expansion, in the chart vs NASDAQ. Now, if we observe closely, the price is approaching the 0.5 level again.
So we've established that we expect a continuation of the downtrend and to what extent. In the event the price reverses in the mentioned zone, how far could the price go in the next expansion?
In previous expansions, the price reached algorithmic levels 2 and 2.5, respectively, of the retracements of the accumulation movements that preceded them. In this case, distribution is proving to be quite significant, something that has never been observed in Tesla's stock. For this reason, the subsequent accumulation will have a very large matrix to accumulate. It is not expected that the price will reach the algorithmic levels reached in previous expansions again.
If the price respects the oblique trendline and the respective liquidity zones, if it reverses there and starts a period of accumulation for a few years, we can consider the first algorithmic level of -0.5 as the first target in a next price expansion, always with a long-term perspective, i.e., around $986 (this value is relative and indicative only since a bottom has not been formed yet and we are still in a distribution period).
1- The first accumulation period ranged between $0.9987 and $2.66 and lasted 834 days. This was followed by an expansion period between October 2012 and September 2014, during which the price surged by 984% to $19.43.
2- The subsequent distribution after the expansion occurred over the next year and a half, leading to a correction of approximately 51% to $9.40 per share. The price then accumulated from February 2016 to June 2019 in a range between $9.40 and $25.97, finding support again at the diagonal line in a new correction of 54%. After finding support at the diagonal line, the price surged to achieve a 3434% gain over the next two years, reaching $414.5 per share.
3- The all-time high (ATH) was then reached in November 2021, and since then, the price has been in a distribution period during which it has depreciated by 75% from the peak.
The question to ask is until when and to what extent could Tesla's stock correct?
The diagonal line where the price found support more than once is still somewhat distant. The price could either reach it in the short term by falling there or it could start accumulating in a range, trading sideways until it finds the trendline again somewhere around 2027.
Looking at the price action since the ATH:
The price has been fairly offered since the ATH, not leaving behind significant liquidity zones. Since the ATH, we see how the price has begun to respect bearish arrays and violate bullish ones. In the only significant retracement since the ATH, the price showed weakness, continuing to respect the bearish arrays and reacting in liquidity zones with algorithmic confluences. After this lower high and this lack of strength from the price to break through the bearish arrays, the continuation of the downtrend is favored.
Okay, so we expect a continuation of the price downwards, but to what levels?
The trendline alone doesn't provide support, although it may have a psychological component for traders. The liquidity zones that provide counterparty liquidity to the price near this line are the levels we're looking for. Therefore, we have a recent lower low that hasn't been taken yet. We also have a VPVR zone that stands out to us and represents a zone of a monthly Fair Value Gap. The FVG also has a confluence with the 0.5 retracement of the last uptrend movement. The two mentioned liquidity zones are not far apart from each other, so we expect a price reaction in the range between $70 and $101.9. We'll have to see later if the reaction in this zone is significant and, if so, evaluate over time whether it's a retracement or a price reversal.
Historically, Tesla has never retraced to the 0.5 retracement level of expansion movements.
This could be a good opportunity if the price reacts there.
Another interesting perspective is comparing Tesla to the NASDAQ:
As we can see in the image below, in June 2019, the price not only touches the diagonal trendline but also reaches the 0.5 retracement level of the previous expansion, in the chart vs NASDAQ. Now, if we observe closely, the price is approaching the 0.5 level again.
So we've established that we expect a continuation of the downtrend and to what extent. In the event the price reverses in the mentioned zone, how far could the price go in the next expansion?
In previous expansions, the price reached algorithmic levels 2 and 2.5, respectively, of the retracements of the accumulation movements that preceded them. In this case, distribution is proving to be quite significant, something that has never been observed in Tesla's stock. For this reason, the subsequent accumulation will have a very large matrix to accumulate. It is not expected that the price will reach the algorithmic levels reached in previous expansions again.
If the price respects the oblique trendline and the respective liquidity zones, if it reverses there and starts a period of accumulation for a few years, we can consider the first algorithmic level of -0.5 as the first target in a next price expansion, always with a long-term perspective, i.e., around $986 (this value is relative and indicative only since a bottom has not been formed yet and we are still in a distribution period).