Tesla Inc. (TSLA) could be in the beginning of deep and sharp decline.
Prior to TSLA’s all-time high in November 2021 it was a leading stock in the bull market that began in March 2020. More recently since early 2023 TSLA has resumed its market leadership role. If TSLA begins a large decline there’s a good chance the main U.S. stock indices could also drop.
The daily chart of TSLA courtesy of Trading View illustrates its action since late 2021.
Recently both the daily MACD and RSI have recorded massive bearish divergences.
Note that in the last part of the TSLA rally that began in early July, MACD – Histogram was below the “zero” line and stayed below the line for almost two weeks. This type of reading coming after an extended rally is an extremely bearish warning.
The message coming from the daily RSI is even more bearish.
Note the extremely high RSI reading just prior to the TSLA all-time high in November 2021. This is the type of reading that occurs at a blow off top. Note that in June 2023 RSI almost reached the same level recorded in late 2021. Subsequently at the TSLA 07/19/23 top, RSI had a massive bearish divergence. Not only that, but the divergent reading came when RSI was still in the overbought zone – above 70%! The massive bearish divergence coming at a relatively high reading implies TSLA could be due for a large decline.
In addition to the bearish momentum look at where TSLA peaked on 07/19/23.
The high on that day was just above a Fibonacci .618 retracement of the 2021 to 2022 decline. And what was the exact price high? The TSLA high on 07/19/23 was 299.29 just below round number resistance at 300.00. The high is also in the area of chart resistance from August to September 2022.
Powerful price resistance accompanied by massive bearish divergences is usually the recipe for a large decline.
Reminder – U.S. FOMC interest rate decision is on 07/26/23.
Four Dimension Trading 