TSLA's 2020 Rally Was a “Fundamental” Fluke. But it Was No Elliott Wave Accident
TSLA's rally should have never happened… except, it was part of the Elliott wave plan all along
by Nico Isaac
Updated: November 05, 2020
You may not want to take your hands off the steering wheel just yet, says an October 30 CNN Business article about Tesla's new, self-driving software. Beta-testers of the program reported a litany of "unsafe situations" like "nearly driving off the road into medians." Meanwhile one Tesla owner posted a YouTube video of himself using the AI technology which showed his car weaving in and out of lanes and missing turns. He quipped into the camera, "I swear I'm not drunk! It's my car."
Overriding commands and doing its own thing -- could the same be said of Tesla stock's 2020 rally to record highs, pictured here?
According to this October 12 Business Insider headline -- yes!
This is the perspective of one analyst at the esteemed Wall Street firm:
"We have never seen stocks rally so quickly without taking so little account of past fundamentals... Tesla's rally through 2020 is contrary to expectations, the market's precedent and even its own example."
"Contrary to expectations," indeed. At the start of 2020, Tesla was the "most shorted stock in the US," according to a January 16, 2020 Business Insider. And, that same day, Morgan Stanley recommended selling Tesla stock for the first time in seven years, warning its meteoric rally is "unsustainable." (Jan. 16 Bloomberg)
From there, TSLA continued to rally -- AND continued to ignore data suggesting it should be doing anything but. In May, Tesla's own CEO Elon Musk posted this tweet calling the company's stock "too high" for comfort.
And in July, AutoNation's CEO called Tesla's stock valuation "insane" by normal standards.
So, the multi-billion-dollar question is why has TSLA ignored its "fundamentals"?
The answer -- because TSLA's price trend, like the trend of every other freely traded market, is driven by investor psychology, which unfolds as Elliott wave patterns on price charts. "Fundamentals" do matter for individual stocks more than the broad markets, but even for stocks -- how many times have you seen a rally after a missed earnings report, or a sell-off after a new, highly anticipated product announcement?
From an Elliott wave perspective -- that is, from the perspective of the irrational investor psychology --TSLA's rally was no surprise. And from the very beginning of the Tesla's record-shattering 2020 performance, our Trader's Classroom editor Jeffrey Kennedy alerted his subscribers to every major turn in the stock's road ahead, starting here:
The January 15, 2020 Trader's Classroom outlined this path moving forward on TSLA's price chart: further rise, a pullback, and another rebound toward "the $800 area" in the coming months. (Remember, this is at the time when TSLA was the "most shorted stock in the US"!)
Tesla followed Jeffrey's cues: Prices soared to and above Jeffrey's $800 target by closing at $917 per share on February 19. This was followed by a month-long pullback to $360 on March 18.
The March 5 Trader's Classroom showed this next leg of the advance and said: "We have enough steam in Tesla to get up the $1150 a share price level, [specifically citing this $1157.77 area]." (Another "crazy" call, if you think about it, considering that it came in the midst of the pandemic's first wave, when the future seemed the bleakest.)
Enough steam indeed! Tesla's bull run reignited, pushing prices to $1157 and beyond in early July.
The July 7 Trader's Classroom acknowledged the stock's staggering gains, one's Jeffrey believed were far from over. He showed this chart and said:
"Back in March, I offered an upside objective of $1157.77 and that's when I got a few emails saying, 'Really? Really you think we're going to head that high?!' Well, look at us now. We're currently trading there and then some.
"So, how high can Tesla go now? Well, I'm going to throw another number at you and I'll probably get some chuckles again but hey... I think Tesla stands a good chance to run to $1750."
From there, prices soared into their Elliott wave target area.
Jeffrey then allowed for the emotions surrounding Tesla's August 31, 5-1 stock split to settle down before taking another look at the stock here:
October 15 Trader's Classroom presented this near-term outlook: a decline into the end of the month.
Tesla's October sell-off followed on cue, prompting one October 30 MarketWatch to include the company on its list of "worst-performing stocks for October."
In the end, there's only one reliable "software" keeping you on the road to opportunity in the world's leading stock markets: our Trader's Classroom. Find out what ticker symbols are on Jeffrey's watch-list today and get instant access to his action-oriented video lessons before you pass the exits!
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