Tesla's Worst Week Since 2022 Breaks Key Support, and Charts Now Eye $296

Tesla stock just had its ugliest week in years. Shares closed at about $313, down nearly 18% over five sessions, the stock's steepest weekly drop since 2022. The slide smashed through a key support level, and the charts now point to $296 as the next stop. Here is what happened and what the levels say.

What triggered the drop#

The selloff started with Tesla's second-quarter earnings. On the surface, parts of the report looked strong: revenue hit a record $28.24 billion, up 26% from a year earlier, and the company delivered a record 480,126 vehicles with its largest order backlog since 2023.

The problem was profit. Adjusted earnings came in at $0.33 per share, well short of the $0.51 Wall Street expected. Operating margin, a measure of how much profit the company keeps from each sale, collapsed to just 1.4%. Spending jumped 142% to $5.79 billion as Tesla poured money into artificial intelligence, its Optimus robots, and robotaxis. As a result, free cash flow, the money left after expenses, turned negative for the first time since early 2024.

In short, Tesla is selling more cars than ever but earning far less on them, and investors punished the stock for it.

The technical breakdown#

The chart damage was just as clear. Since peaking near $455 in May, Tesla had been sliding within a defined downward channel for about three months. On July 23, the day after earnings, the stock broke below the bottom of that channel and sliced through the important $350 support level in a single move.

Crucially, it did so on the heaviest trading volume in months. High volume on a breakdown usually signals real conviction from sellers, not a brief scare.

Why the charts point to $296#

When a stock breaks out of a channel like this, traders estimate the next target by projecting the size of the pattern downward. That math points to roughly $296, about 5% below Friday's close.

That makes the $296 to $310 zone this week's key battleground. If sellers push below $296, the next support sits near $260, another 12% lower. One cushion for the bulls: Tesla's long-term 200-day average sits near $283, a level that has historically acted as deeper support.

The other side of the trade#

The picture is not entirely one-sided. Momentum gauges like the RSI are now in "oversold" territory, which sometimes precedes a bounce. Some on Wall Street think the reaction was overdone, and Cathie Wood's ARK funds actually bought around 160,000 Tesla shares during the drop. Analysts at Piper Sandler trimmed their price target but still see the stock far higher, at $450.

For the bulls to regain control, though, Tesla would need to climb back above $350 and re-enter its old channel. Until then, the trend points down.

The bottom line#

Tesla's record revenue was overshadowed by shrinking profits and negative cash flow, and the chart followed suit. The near-term technical target is $296, with $260 below that, while $350 is the line bulls must reclaim to flip the trend. With the stock oversold and long-term support near $283, the $296 area is the level to watch first.

Image credits: Tradingview.com