Renewed tensions between Musk and Trump weigh on Tesla shares

Tesla shares have rebounded strongly from their June low, just as previously forecast. However, for the second consecutive month, the 350 resistance level has capped further price growth. Despite the generally optimistic backdrop in the broader US stock market, Tesla stock is no longer participating in the rally. The price has now dropped to the 315 support level, and a break below this mark could shift the correction target to 295.

The recent sell-off in Tesla shares is due to renewed disagreements between Elon Musk and Donald Trump. Musk reiterated his opposition to Trump's proposed tax bill, which he warns could significantly increase the US budget deficit. According to Musk, the bill would undermine the cost-cutting efforts he championed during his tenure at the Department of Government Efficiency (DOGE).

In response, the US president urged DOGE officials to review the broad benefits enjoyed by Tesla and other Musk companies. Trump has threatened to cancel these advantages, particularly subsidies related to the purchase of electric vehicles. He stated that electric cars should not be forced upon Americans, especially if they are not eager to buy them.

In addition to the potential loss of benefits, Tesla is also facing increased competition from Chinese companies. Last week, Xiaomi unveiled the YU7 electric car, a direct competitor to Tesla's Model Y. While the YU7 is not yet available outside China, it received almost 300,000 orders in just one hour in its home market. Although Tesla is partially protected by high US import duties on Chinese EVs, its international sales could face an even steeper decline than in recent months.

The Stochastic indicator on the daily chart for Tesla shares is trending downward, though it is still far from signaling a reversal. If the 315 level is broken, a move to the 295 mark is highly probable.

Consider the following trading strategy:

Sell TSLA near the 315 level. Take profit — 295. Stop loss — 350.