Tesla Stock. A fast 52% Decline from All-Time Highs

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Tesla, Inc. (NASDAQ: TSLA) has experienced a dramatic decline since reaching its all-time high of $488.54 in December 2024. As of March 10, 2025, the stock trades near $240, representing a steep 52% drop in just over two months. This article examines the technical factors behind this significant correction, employing various analytical frameworks including Elliott Wave Theory and historical pattern recognition to understand both the causes and potential future trajectory of TSLA shares.

Tesla Stock: Analyzing the 52% Decline from All-Time Highs

Market Context and Recent Performance

Tesla has long been characterized by its pronounced volatility, frequently experiencing rapid price expansions followed by severe contractions. The stock’s meteoric rise through late 2024 was fueled by multiple factors:

  1. Anticipation of new product announcements including next-generation vehicle platforms
  2. Promising developments in Tesla’s Full Self-Driving (FSD) technology
  3. Growing energy storage business performance
  4. Speculative positioning ahead of the Q4 2024 earnings report

The subsequent decline appears to have been triggered by a combination of:

  1. Q4 2024 earnings that missed elevated market expectations
  2. Concerns about increased competition in key markets including China and Europe
  3. Rising interest rates impacting growth stock valuations
  4. Broader market rotation away from technology stocks
  5. Technical exhaustion after an extended bull run

This correction represents one of the most severe in Tesla’s recent history, comparable to previous significant drawdowns in 2022 and late 2023.

Technical Analysis of the Decline

Price Structure and Key Levels

The decline from $488.54 has unfolded in a series of bearish waves, breaking through several critical support levels:

  • $440 level: Initial support from November 2024 highs
  • $400 psychological level: Brief consolidation in January 2025
  • $350 level: Previous resistance from September 2024
  • $300 level: Major psychological support with high volume node
  • $250 level: Current battleground with confluence of technical factors

The Volume Profile shows significant accumulation zones around $220-240, suggesting potential support developing in the current trading range. The Volume-Weighted Average Price (VWAP) from the start of the decline now sits at approximately $325, serving as a significant resistance level for any recovery attempts.

Tesla Stock: Analyzing the 52% Decline from All-Time Highs

Moving Averages and Trend Indicators

The decline has pushed $TSLA well below all major moving averages:

  • The 20-day EMA ($265) has crossed below the 50-day SMA ($310) in late January, confirming the bearish trend
  • The 200-day SMA currently at $370 represents significant overhead resistance
  • The stock is trading approximately 35% below its 200-day SMA, indicating extreme oversold conditions by historical standards

The Average Directional Index (ADX) reading above 40 confirms the strength of the downtrend, although recent readings show early signs of diminishing momentum.

Relative Strength and Momentum

The Relative Strength Index (RSI) on the daily timeframe reached oversold territory (below 30) multiple times during the decline:

  • Late January 2025: RSI touched 25 before a brief relief rally
  • Mid-February 2025: RSI reached 22, its lowest reading since March 2023
  • Current reading: 34, showing potential positive divergence forming

The MACD (Moving Average Convergence Divergence) indicator shows the bearish momentum may be waning, with histogram bars becoming less negative and potential for a bullish crossover forming.

Fibonacci Retracement Levels

Measuring from the October 2023 low ($172.58) to the December 2024 peak ($488.54):

  • 38.2% retracement: $367.82 (broken in January)
  • 50% retracement: $330.56 (broken in early February)
  • 61.8% retracement: $293.29 (broken in late February)
  • 78.6% retracement: $240.73 (current trading area)

The stock has now retraced nearly 80% of its 15-month bull run, which historically often represents the maximum retracement before either a major reversal or complete failure of the prior move.

Elliott Wave Analysis

The recent price action in Tesla can be interpreted through the lens of Elliott Wave Theory, providing context for both the decline and potential future movements.

Wave Structure of the Previous Bull Run

The advance from October 2023 ($172.58) to December 2024 ($488.54) appears to have formed a textbook five-wave impulse pattern:

  1. Wave 1: October 2023 to January 2024 ($172.58 to $268.39)
  2. Wave 2: January 2024 to February 2024 correction ($268.39 to $207.82)
  3. Wave 3: February 2024 to August 2024, the strongest and longest wave ($207.82 to $385.50)
  4. Wave 4: August 2024 to September 2024 consolidation ($385.50 to $342.74)
  5. Wave 5: September 2024 to December 2024 final push ($342.74 to $488.54)

Current Corrective Pattern

The decline from the December 2024 peak appears to be forming an A-B-C corrective pattern:

  1. Wave A: December 2024 to January 2025 ($488.54 to $352.63)
  2. Wave B: January 2025 relief rally ($352.63 to $398.21)
  3. Wave C: Late January 2025 to present ($398.21 to current levels)

The C wave appears to be unfolding as an extended five-wave impulse itself, with the fifth wave potentially nearing completion based on momentum indicators and Fibonacci projections.

Wave Count Implications

According to Elliott Wave principles, after completing a major five-wave impulse upward and a three-wave corrective pattern downward, we should expect another five-wave pattern to develop in the original upward direction. However, the depth of the current correction (approaching 80% retracement) raises questions about whether:

  1. This is merely wave A of a larger A-B-C correction
  2. The entire bullish structure is being negated, suggesting a major trend change
  3. This is a complete A-B-C correction that will lead to resumption of the uptrend

The resolution of the current price action around the 78.6% Fibonacci level will be crucial for determining which scenario is unfolding.

Historical Pattern Analysis

Comparison to Previous Major Tesla Corrections

Tesla’s price history shows several comparable corrections:

  1. 2020 Correction: September to November 2020 (adjusted for split)
    • Magnitude: 44% decline
    • Duration: 11 weeks
    • Recovery: Complete price recovery in 8 weeks
  2. 2021 Correction: January to May 2021
    • Magnitude: 39% decline
    • Duration: 18 weeks
    • Recovery: Partial recovery (61.8%) before resuming decline
  3. 2022 Major Bear Market: November 2021 to December 2022
    • Magnitude: 73% decline
    • Duration: 56 weeks
    • Recovery: 145% rally from the bottom
  4. 2023 Correction: July to October 2023
    • Magnitude: 38% decline
    • Duration: 14 weeks
    • Recovery: Complete price recovery in 12 weeks, followed by new highs

The current correction most closely resembles the 2022 bear market in terms of magnitude, though its velocity has been much faster. The steepness of the decline resembles the September 2020 correction, which was also characterized by technical exhaustion after a parabolic run-up.

Market Cycle Positioning

In the context of broader market cycles, Tesla’s correction comes amid a period of adjustment for high-growth technology stocks as interest rate expectations shifted in early 2025. Using the Wyckoff Market Cycle framework, Tesla appears to be in a phase between the “Markdown” and potential “Accumulation” stages, with signs of selling exhaustion beginning to emerge.

Sentiment and Positioning Metrics

The dramatic price decline has significantly altered sentiment metrics:

  1. Options Positioning: The put/call ratio has reached 1.45, an extreme reading that historically coincides with local bottoms
  2. Short Interest: Has increased from 2.8% to 4.6% during the correction
  3. Analyst Ratings: 12 downgrades since December 2024, potentially nearing pessimism extremes
  4. Retail Sentiment: Social media mentions show capitulation behaviors, with search interest for “Tesla stock crash” reaching highest levels since 2022

These sentiment extremes often mark significant inflection points in Tesla’s trading history.

Fundamental Backdrop Influencing Technical Patterns

While this analysis focuses on technical patterns, several fundamental factors have contributed to the technical breakdown:

  1. Q4 2024 Earnings Disappointment: Revenue growth of 15% year-over-year missed consensus expectations of 19%, while automotive gross margins contracted to 17.8% from 18.9% in Q3.
  2. Production Challenges: Reports of production adjustments at both Shanghai and Berlin factories raised concerns about demand elasticity.
  3. Competitive Landscape: New model launches from competitors in key segments have pressured Tesla’s market share, particularly in China and Europe.
  4. FSD Progress: While technological improvements continue, regulatory and adoption hurdles have tempered near-term revenue expectations.
  5. Macro Environment: Rising bond yields have disproportionately impacted high-multiple growth stocks like Tesla.

These fundamental developments have manifested in the technical patterns, reinforcing key breakdown points and influencing volume profiles during the decline.

Potential Price Projections

Short-Term Outlook (1-3 Months)

Based on the technical structure, several scenarios emerge for the near-term:

Bearish Scenario

  • If support at $240 fails, the next major technical support exists at $215 (the November 2023 breakout level).
  • The EMA89 sits around $225 and it could also be a possible support.
  • A break below $215 would likely target the $172-$180 range, representing a complete retracement of the 2023-2024 bull run.
  • Probability: 35% based on current technical structure.

Base Case Scenario

  • Consolidation between $230-$280 for several weeks, forming a base for eventual recovery.
  • Initial resistance at the 50-day moving average ($310) followed by the volume-based resistance at $325-$335.
  • Probability: 45% based on oversold readings and historical patterns.

Bullish Scenario

  • V-shaped recovery challenging the $300 level within 4-6 weeks.
  • Would require substantial improvement in market sentiment or company-specific catalysts.
  • Probability: 20% based on the magnitude of the decline and technical damage.

Medium-Term Outlook (6-12 Months)

The medium-term outlook depends significantly on which Elliott Wave pattern is unfolding:

  1. If the current decline is a complete A-B-C correction:
    • Target: New all-time highs above $500 by Q4 2025
    • Key confirmation: Sustained trading above $350 with expanding volume
  2. If this is wave A of a larger corrective pattern:
    • Target: Relief rally to $320-$350 zone followed by another decline
    • Key confirmation: Weak recovery characterized by declining volume and negative divergences
  3. If the entire bull structure has been invalidated:
    • Target: Extended trading range between $180-$280 for multiple quarters
    • Key confirmation: Failure to reclaim the 200-day moving average on recovery attempts

The most probable outcome based on cycle analysis and the magnitude of the correction suggests scenario #2, with a multi-month recovery process required before resuming the longer-term uptrend.

Long-Term Outlook (1-3 Years)

From a long-term Elliott Wave perspective, the 2023-2024 advance may represent wave 1 of a new multi-year bullish sequence, with the current correction forming wave 2. If this interpretation is correct, the following projections emerge:

  • Wave 3 target (2026-2027): $650-$750 range (1.618 extension of wave 1)
  • Wave 4 correction: Retracement to $500-$550 range
  • Wave 5 final push: Potential targets in the $850-$950 range

These projections assume Tesla maintains its growth trajectory and innovation leadership in the EV and energy storage markets.

Key Technical Signals to Monitor

Investors should watch for these technical developments to confirm directional shifts:

  1. Volume patterns: Expanding volume on up days versus down days
  2. Moving average relationships: 20-day EMA crossing above 50-day SMA would signal trend change
  3. RSI divergences: Particularly on weekly timeframe
  4. Options skew normalization: Reduction in put/call ratio extremes
  5. Institutional block trades: Large accumulation signatures on time and sales data

Risk Factors to the Technical Outlook

Several factors could invalidate the technical projections:

  1. Black swan events: Geopolitical disruptions or unexpected company-specific developments
  2. Broad market correction: Major indices entering correction territory would likely pressure Tesla regardless of its technical setup
  3. Fundamental deterioration: Q1 2025 earnings missing expectations could trigger new selling pressure
  4. Liquidation events: Forced selling by large institutional holders could create technical cascades

Historical Precedents for Recovery

Based on Tesla’s trading history, major corrections have eventually led to substantial recoveries:

  1. The 2019 correction (40% decline) was followed by a 400% advance in 2020
  2. The 2022 bear market (73% decline) was followed by a 145% rally in 2023-2024
  3. Even the modest 2023 correction (38% decline) led to a 180% advance to new highs

This suggests that while the current correction has been severe, it exists within a pattern of extreme volatility that has historically presented opportunities for significant rebounds.

Technical Tools for Position Management

For investors considering position management at current levels, technical tools suggest:

  1. Scale-in approach: Using Fibonacci levels as entry points (current level at 78.6% retracement represents historical value zone)
  2. Stop-loss placement: Technical stop levels would be appropriate below $215, the last significant support before the 2023 lows
  3. Position sizing: The high Beta coefficient (1.72) suggests appropriate position sizing relative to broader market exposure
  4. Options strategies: Put selling at major support levels offers favorable risk/reward based on elevated implied volatility

Conclusion: Technical Verdict

The technical evidence suggests Tesla stock is approaching the later stages of its corrective decline from the December 2024 peak. Multiple indicators point to oversold conditions, while Elliott Wave patterns suggest completion of the corrective sequence may be near.

The 52% decline has undoubtedly inflicted significant technical damage that will require time to repair. The most probable path forward involves a period of base-building in the $230-$280 range before a more sustained recovery can begin.

For long-term investors, the current levels near the 78.6% Fibonacci retracement historically represent value zones in ongoing bull markets. However, the pace and magnitude of the recovery will largely depend on both technical repair of the price structure and improvement in fundamental growth metrics for Tesla.

The extreme nature of Tesla’s volatility suggests that regardless of the near-term direction, significant price movement can be expected in the coming quarters as the stock works to resolve the tension between its long-term growth narrative and near-term technical damage.

References and Further Reading

  1. Murphy, J. (2022). Technical Analysis of the Financial Markets. New York Institute of Finance.
  2. Prechter, R. & Frost, A.J. (2020). Elliott Wave Principle: Key to Market Behavior. New Classics Library.
  3. Wyckoff, R.D. (1910). Studies in Tape Reading. Traders Press.
  4. StockCharts.com Technical Analysis Resource Center: https://stockcharts.com/school/
  5. Elliott Wave International Educational Resources: https://www.elliottwave.com/
  6. Tesla Investor Relations: https://ir.tesla.com/
  7. NASDAQ TSLA Historical Data: https://www.nasdaq.com/market-activity/stocks/tsla/historical
  8. MarketSmith Pattern Recognition Tools: https://www.investors.com/product/marketsmith/

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. The author does not hold positions in TSLA. Technical analysis has inherent limitations and should be used in conjunction with fundamental analysis and proper risk management practices.