This post might be my most complete analysis going forward. Please note the clear distinction between possible / likely and impossible / unlikely. When I say possible, I'm speaking in the broadest of sense.
Let's start with a blank slate
On the above chart you will notice 2 areas red and blue. They cover the 1.618 and 1.236 projection of the first leg up from 102 to 217. This projection is begins from the correction low of 152.3.
The most important question right now is will we have a 3 wave or a 5 wave rally off the generational low of 102? If we have a 5 waver, then it is
nearly impossible to make a new low.
Extremely unlikely. If it's a 3 waver, then it is
possible we make a new low.
A 5 waver will be numbered 12345 and a 3 waver will be lettered ABC. So we have wave 1/A from 102 to 217. Wave 2/B from 217 to 152.3. One of the most common level for wave C to terminate is the 100% projection of wave A, which put the big test at 268. As you can see. We had a false breakout and sharp rejection off that level one week before P&D. That's when I turned a bit defensive and prepared for a test of 217 should P&D miss estimates. Once P&D was released and it's a 20k beat, we decisively broke through 268 and the next big level is 296.
296 is big for a few reasons. Below this level, a 3 waver scenario is still possible. Plus, the big bad resistance trendline running from November 2021 hangs right on it. I think it's likely we'll reach 296 because of how the stock is currently positioning itself.
If you look at the last 2 times this resistance was tested, you can see 2 sharp rejections right at the contact point. This time we're flagging under it which is a bullish sign.
What happens after 296? Past 296 is 340, which is the 1.618 projection of wave 1/A. At this level, it becomes extremely likely that we're looking at a 5 waver. Therefore, it will take a stellar ER and outlook to get to it. If we rally to 340 post ER, most likely it won't be a bull trap
on the longer timeframe (explanation below).
Technically, a dead cat bounce can still reach 340. However, since it is so far above the resistance trendline, a dead cat bounce will be extremely unlikely if 340 is reached. It's still
possible, but
unlikely.
If this is a 5 waver, the 1.618 projection of wave 1 (340) is the conventional limit for wave 3. From there, we can expect some profit taking and retest of the trendline around 270, before going up again at the end of the year. From 390, we can start an ABC correction to 212-250, which will coincide with the first half of 2024, a period traditionally weak for TSLA. From there we will be ready for a big run to 600+. Please note that the ABC correction doesn't have to end in 6 months. While the target remains 212-250, it can take longer than that, which it did before throughout TSLA history. A lot of factors can influence this timing.
Now, what if TSLA can't get to 340? Maybe the Cybertruck is delayed once more. Maybe gross margin will disappoints. If that happens, 296 will become the top of this leg up, which will return TSLA back into limbo, since a dead cat bounce is still likely at 296. From there, we would have 2 scenarios.
The first scenario is a retest of the 217 - 230 zone before a blockbuster Q3 ER which will take TSLA past 296. This is not a conventional setup and it's really difficult to predict the top of wave 5. We will still have an ABC correction that takes us back to 220 by June 2024.
The second scenario is more grim. If macros deteriorates and the Fed implements more rate hikes, a big dead cat bounce from 102 to 296 can become a reality. The question then will be: will we make a new low, lower than 102? I think it's
possible, but
unlikely. I'm saying this because the drop to 102 was unnatural. Without Elon's selling, I don't think we would have dropped as far as we did. Therefore, it will take a literal disaster to break the 102 low if this turns out to be a dead cat. What I think might happen is we will start a benign triangle correction from 296 like this.
Therefore, my plan right now is:
Net long delta to 296, then close my positions and observe.
If we are rejected at 296, wait for a retest of 217-230.
If 217 holds, then net long delta for another test of the resistance trendline later this year, but I will know the subsequent correction will reach 217 minimum.
If 217 doesn't hold, then be defensive until we've bottomed out.
If we break 296, then net long delta to 340.
At 340, lighten up my position and prepare for the pullback to end at 270, then net long delta to 380.
At 380, close all long positions.
