Another bearish call

In July I kept warning euphoric bulls about coming drop in TSLA only to get smacked by loyal evangelists of Elon Mask.

For example, on July 12th 2018 I tweeted: “TSLA: a setup for a drop” accompanied by the following chart:

TSLA - Daily chart updated on 12 July 2018

Back then I expected a deep pullback targeting at least $173. However, after TSLA dropped under $250 it reversed its course and retested previous highs. By this moment I have not changed my mind about the large rally started at $14.98 in June 2010 having completed in June 2018 at $386.99. I can count full large five waves up being in place.

In general when a stock tops out in five wave impulsive fractal we expect a corrective structure to unfold. It is impossible to predict what specific corrective pattern will be played out. There are two general types of corrections, through price or through time. When stocks correct through price following a simple zig-zag pattern, we see deep pullbacks that may correct anywhere from 50% to 61.8% or even from 76.4% to 85.4% of the whole preceding rally. It seems in this case we will get a shallow correction through time called a double three which is a combination of two corrective A-B-C moves down. On the chart below you can see that the first decline shaped as A-B-C stopped at a common retracement ratio of 38.2% of the large preceding rally started in 2010.

TSLA - Daily chart updated on 1 November 2018

I count this move up off October 2018 lows as a corrective wave B up of the second A-B-C fractal combining the large double three corrective pattern.

At this point I expect an impulsive looking decline in wave C down shaped as five waves that should complete the whole correction off the June 2018 top. That coming drop should make a lower low under the low of $244.59 reached in April 2018. Particularly, I see two potential bottoming zones: $196-$176 and $143 – $123. To get a good high probability long setup we need to get a completed five wave move down bottoming in one of those green support zones.