In a striking forecast, Morgan Stanley (NYSE:MS) analyst Adam Jonas predicted in January that Tesla’s (TSLA) shares could rally to $800.
The bank also reiterates Tesla (NASDAQ:TSLA) as its top pick and raised its price target to $430 from $400. However, it has a bear case target of $200 for Tesla, reflecting potential headwinds such as stricter regulations and slower market expansion.
In this article, we apply the Elliott Wave Principle (EWP) to Tesla’s share price to see if MS’ “$200 than $800” is feasible. Starting with the big picture, using a monthly candlestick chart, see Figure 1 below, we find that TSLA is most likely completing an irregular running flat Primary (blue) 4th wave (W-IV) at around $175. Once the W-IV is complete, it can embark on the Primary 5th wave (W-V) to new All-time highs (ATHs), possibly $800.
A flat correction comprises three waves: in this case, the (black) major W-a, -b and -c. These three waves, in turn, consist of three (a, b, c), three (a, b, c), and five (i, ii, iii, iv, v) waves, respectively, and relate to each other as a=b=c. However, there are several variations possible.
- The first pertains to the b-wave, which can become irregular, i.e., surpass the start of the W-a, in this case the Primary W-III, and be 1.236x W-a. This was reached at the recent all-time high: $488.
- The second variation pertains to the c-wave. It can also end either below or above the end of the W-a, i.e., in this case that is called expanded or running, respectively.
Zooming in on the price action using the daily candlestick resolution, we find that TSLA is most likely in the red W-iv of black W-c of blue W-IV. See Figure 2 below. We can account for all the sub-waves since the early 2023 low, supporting the b-wave’s three-wave advance to the recent ATH and the current c-wave’s five-wave decline.
From Figures 1 and 2, it follows that TSLA adheres well to trendline support and resistance as it has held A) above the ascending lower grey dotted trendline since 2020 and B) below the descending grey dotted trendline from the 2021 high to the summer of 2024.
Besides, these two critical trendlines cross in June of this year at around $170, almost exactly where the black W-c equals the black W-a, measured from the top of W-b: blue target zone. We have high confidence in this target zone as price reached and reversed strongly from the red and green boxes we forecasted for the respective pullbacks in 2023 and 2024.
Moreover, we expect TSLA to wrap up its final 4th and 5th wave(s), as shown in Figure 2, to complete the five-wave impulsive c-wave. This can take several weeks to months. The red W-iv should ideally target the 200-day simple moving average at the lower blue dotted trendline at around $280 in May.
Thus, using the EWP, we find that Tesla’s shares can target around $175 to complete a complex, protracted, Primary 4th wave as an “irregular running flat”. These corrective patterns are typical for 4th waves. Once reached, it can rally to new ATHs and $800 is not out of the realm of possibilities.
Thus, based on the EWP, MS’s claim is right on the money, even for a “modest” $430 target.