In Tesla's case, investors have been too optimistic recently. The stock is up 186% in the past six months, climbing from $177 low in May 2019 to $499 this month. Unfortunately for the bulls, no trend lasts forever. Therefore, once investors run out of optimism, the stock is likely to fall significantly. The question is, How soon?
In order to find out if Tesla stock is a good pick now near $500, let’s take a look at its chart above.
The shows Tesla's entire progress since May 2019. As visible, the price appears to have formed a textbook five-wave impulse pattern, labeled 1-2-3-4-5. It certainly has been a wonder to behold while it lasted. The problem is the theory states a three-wave correction follows every impulse.
Normally, the corrective phase of the cycle would erase the entire fifth wave. For Tesla , this means a sell-off to the support of wave 4 near $327.
The Moving Average indicator reinforces that the price is overextended. If this count is correct, the next couple of weeks can be a lot different than the past two months.
What's your view on Tesla Stock?