Tesla Is in the Crosshairs

By Larry Benedict, editor, Trading With Larry Benedict

President Trump and Elon Musk (the world’s richest person) are sparring… And the feud is spilling over to social media once again.

Elon Musk took to X to blast Trump’s “big, beautiful bill” of tax cuts and other spending initiatives. It’s projected to add over $3 trillion to the federal deficit.

The animosity is a stark change compared to just months ago, when Musk was a regular fixture around Washington. He even headed the Department of Government Efficiency (DOGE) to root out “wasteful” spending.

President Trump hit back by threatening to unleash DOGE on Elon’s enterprises… stating that “DOGE is the monster that might have to go back and eat Elon.”

Tesla (TSLA) is caught in the crosshairs.

Elon’s public battle with the president is a concern for Tesla shareholders, especially now that Trump is threatening to cut government subsidies that benefit Musk’s companies.

But if you know how to break down the chart and price action, Tesla’s pullback wasn’t without warning…

And the next drop could be bigger.

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TSLA Tips a Pullback

The growing divide between Musk and the president may seem sudden. But Tesla’s chart hinted at trouble brewing for over a month.

On May 30, Elon and Trump were still on good terms. Musk even attended an event alongside Trump at the White House, where the president praised the work Musk did as part of DOGE.

But I had this to say back then, following a rally in TSLA shares:

TSLA currently extends 29% above the 50-day moving average. That points to a potential mean-reverting move lower.

There are also negative developments with the RSI.

As TSLA is rallying, the RSI is making a lower high.

It’s a small negative momentum divergence. But it’s worth watching closely, as the RSI hovers near the overbought level at 70.

Tesla shares may have raced back toward record highs. But a challenging outlook and stretched chart levels mean that investors should be cautious…

The stock went on to drop nearly 25% as Musk and Trump traded insults at the start of June.

As tensions eased, the stock found traction at a key support level and recovered lost ground.

But another look suggests the most recent feuding could lead to even more downside this time around.

Losing Key Support

The first showdown between Musk and Trump sent TSLA lower to a key support level.

That level turned TSLA shares back around. Take a look at the chart below:

(Click here to expand image)

The dashed line shows the negative divergence on the RSI that I wrote about. The stock made a higher high while the RSI made a lower high.

The weakening momentum saw the shares drop until TSLA found a dual support zone at “1.” Support came from the 50-day moving average (MA – blue line) and price support at the $300 area.

A rally off that level sent TSLA back toward the levels seen in late May. But that created an even larger RSI divergence. Take another look at the chart:

(Click here to expand image)

TSLA tested the $350 area, but that move saw a lower high on the RSI.

It’s also worth noting that the RSI couldn’t get back above 60 during the rally into late June. That often serves as an overbought zone in a downtrend.

From there, TSLA has turned lower and is taking out key support levels. That includes the 50-day MA, which the stock gapped below this week (arrow).

The stock is now sitting on the critical $300 support level once again.

If that level can’t hold, then TSLA could target the lows around $220 seen between March and April.

So now is the time to keep a close watch on TSLA’s next moves.

Because as the feud between Musk and Trump grows, it could take an even bigger toll on TSLA stock…

Happy Trading,

Larry Benedict
Editor, Trading With Larry Benedict