This article was submitted by Aaron Hill from FP Markets.
Harmonic Weekly Resistance Holding Firm
I wanted to return to Tesla (TSLA) today, a stock I featured in this week’s Weekly Market Insight.
As you can see from the weekly chart, sellers have certainly put in an appearance from the harmonic bat pattern’s potential reversal zone (PRZ) between $300.79 and $283.88. WTD, price is down 2.4%.
Now, technically speaking, harmonic shorts from the PRZ may target the 38.2% and 61.8% Fibonacci retracement ratios of legs A-D at $215.19 and $172.01, respectively. It is important to note that sharing chart space with the 38.2% Fibonacci ratio is weekly support priced at $219.86.
Another key observation from the weekly chart is that the Relative Strength Index (RSI) is rotating south ahead of overbought territory. Crucially, though, I also see that there is a chance the indicator could pencil in negative hidden divergence here (this means price essentially leads the way rather than the indicator [as in normal divergences]; in this case, price action forms a lower high, and the indicator forms a higher high).