Tesla stock slides after Morgan Stanley highlight China risks

The Tesla stock price lost ground yesterday after analysts warned of implications for TSLA following China’s crackdown on ride-hailing App DiDi.

Tesla Inc (NASDAQ: TSLA) fell 2.26% to $644.65 as a wave of broad-based selling engulfed Electric Vehicle (EV) stocks.

Tesla’s relationship with Beijing may become strained in the months ahead due to the Chinese Communists Party’s latest assault on the country’s tech giants.

The CCP flexed its muscles following DiDi’s recent US stock market listing. Regulators banned the ride-sharer from taking on new customers and fatally removed DiDi from app stores, citing security concerns. Subsequently, its US-listed ADR’s collapsed 20% on Tuesday.

Now Morgan Stanley predicts that Tesla could also fall under the scrutiny of the CCP.

The regulations around autonomous driving in China should get stricter over time and may present some increasing challenges to foreign automakers in the years ahead,”

Furthermore, Tuesday’s research report from analyst Adam Jonas reminded investors:

“Tesla could face similar issues in China, given its mapping and artificial intelligence technology.” 

Although the bank reiterated the company’s long-term positive outlook and maintained an overweight rating on the stock.

MS has been a staunch supporter of Elon Musks firm and in April told clients:

“auto investors face greater risk not owning Tesla shares in their portfolio than owning Tesla shares in their portfolio.”

However, given the recent Tesla stock price action, those same investors may get a chance to acquire the stock at a lower valuation soon.

TSLA technical outlook

The technical outlook for tesla has soured in the last two days. Despite faring better than Chinese rival Nio (NYSE: NIO), which crashed 8.5%, TSLA has started to break down.

The daily chart shows the stock has reversed its trend line breakout from late June. Furthermore, TSLA has slipped below the 100-Day Moving Average at $662.89.

The 50 and 100 DMA’s are present below the market at $631.48 and $628.59, respectively. This should provide a significant band of support. Although, the negative momentum could lead to the 50-day crossing below the 100. This ‘death cross’, should it happen, would indicate a deterioration of bullish momentum.

Major support can be found at $598, where a long term uptrend is visible. The trend, in place from March 2020, should be considered a must-hold level for Tesla stock. Therefore, a failure to sustain $598 would target the $540 double-bottom formation.

The immediate outlook is skewed to the downside. But, if the Tesla stock price can climb above the descending trend line and the 100 DMA, this view becomes invalid.

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Tesla stock price chart (Daily)

Tesla stock price

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