TSLA - Setting Up for a Bearish Move?Tesla’s current price action looks as it is unfolding within a classic Wyckoff Redistribution pattern, indicating a potential bearish continuation. This analysis will break down the key phases and volume confirmations leading up to the Upthrust After Distribution (UTAD), which could be a critical point.
Redistribution Phases:
Preliminary Supply (PSY):
The first sign of significant selling pressure, where larger players start to distribute their positions. This phase marks the beginning of the trading range and is characterized by an initial reaction in the market, setting the stage for the upcoming phases.
Selling Climax (SCLMX):
The SCLMX is marked by a dramatic increase in selling pressure, causing a sharp decline in price. This is a pivotal moment in the pattern, establishing the lower boundary of the trading range with a notable increase in volume and volatility.
Automatic Reaction (AR):
Following the SCLMX, the AR is a swift rebound that creates the upper boundary of the trading range. This reaction shows a temporary balance between supply and demand but does not indicate a reversal of the overall trend.
Secondary Test (ST):
The ST is a retest of the SCLMX level, where the market checks if demand is strong enough to hold the lower boundary. The lower volume during the ST suggests that the buying pressure is weakening, reinforcing the bearish outlook.
Secondary Test in Phase B (ST - Phase B):
This ST occurs during Phase B, further testing the lower boundary of the trading range. It confirms the structure of the range and indicates that the market is preparing for further distribution.
Upthrust (UT):
The UT represents a deceptive breakout above the upper boundary of the trading range, aimed at trapping breakout traders and shaking out early short positions. This phase often leads to a quick reversal back into the range, signaling that the distribution process is still ongoing.
Upthrust After Distribution (UTAD):
The UTAD is the final effort by the market to push prices above the trading range. This phase is typically accompanied by a surge in volume as the last of the demand is absorbed by the stronger hands. The failure of this breakout and the subsequent reversal back into the range is a strong signal that the market is ready to move lower.
Volume Analysis:
The volume during these phases is crucial for confirming the pattern. High volume during the PSY, SCLMX, and UTAD phases indicates strong selling pressure, while lower volumes during the ST phases suggest weakening demand.
The volume spike during the UTAD phase is particularly important, as it indicates that the remaining demand is being absorbed. The subsequent drop in volume and if there is a reversal back into the range it will confirm that the market lacks the strength to sustain higher prices.
