Nikola (NASDAQ:NKLA) has been nothing short of electrifying in its first week of trading. But going forward, are shares about to lose traction among some investors looking to play the market? Let’s take a look at Nikola stock off and on the price chart to help reach a more confident risk-adjusted determination.
Have you ever dreamed of owning the next Amazon (NASDAQ:AMZN) or more fittingly, the next Tesla (NASDAQ:TSLA)? Apparently you can with Nikola stock. Or more correctly, you wouldn’t be alone in believing the connection.
Following a re-engineered reverse split merger this past week with special purpose acquisition company VectoIQ, Nikola has been allowed a new lease on life as a publicly traded company. And what some on Wall Street are already calling the Tesla of trucks, didn’t go unnoticed.
Brazen enthusiasm saw Nikola’s market cap surpass the likes of Ford (NYSE:F) and General Motors (NYSE:GM) at its inter-week high of $93.75 last Tuesday. Shares also became one of last week’s must-own stocks on Millennial-driven investing platform upstart Robin Hood.
So, what’s all the hubbub about? Nikola has raced onto the automotive scene with big promises of hydrogen fuel-cell and battery-electric powered pickup trucks and semi-trailers. But, there are no tires to kick as of yet. Nor does Nikola have any manufacturing capabilities to roll out future products, such as its much publicized Badger pick-up. As much and for a forward-looking stock market, Nikola is one where investors definitely need to look out past 2020.
According to the outfit’s freshly minted billionaire CEO Trevor Milton, Nikola is looking to partner with an automobile manufacturer which can make its wide-eyed, alt-energy design ambitions a reality.
In the interim, real world operational details haven’t stopped the trend of environmental, social and governance investing, which is hot with younger investors from pushing the envelope and hitting the buy button for shares of Nikola.
Nikola Stock 60-Minute Price Chart
Source: Charts by TradingView
Long-term in Nikola is currently the domain of the 60-minute price chart. A countering lack of fundamentals versus an abundance of PR hype have led to an ultra-volatile stock. In my view, it’s also one, whether bearish or bullish, that’s squarely best left to more active traders.
Taking a peek at this time frame, Nikola has pulled into a very tight lateral contraction around its 50% retracement level after correcting as much as 62% of its lifetime rally formed over the past week. Even the best stocks do pullback. And deeper declines of 30% are common in healthy markets. But in weaker environments like we’re seeing and with Nikola’s highly speculative position, the current correction is par for the course.
The decline in Nikola stock could also grow much deeper in the blink of an eye if today’s “risk-off” trade intensifies.
For the moment, or more aptly, for the next hour and then likely several dozen more after that, Nikola is certainly interesting to watch from the sidelines. As approached above though, my advice is for investors to wait until a daily chart with a similar minimum number of candlesticks forms before considering whether Nikola is the next Tesla or quite simply a fanciful car wreck as some analysts contend.
At the end of the day, I don’t judge. And for those bulls and bears with risk appetites that need to be satisfied today or in the very near future as shares breakout or breakdown from today’s calm before the next storm, I’d say, “go for it.” But without risking more dire trading account injuries, I’d also stress smaller position sizing and not entirely liquid, but still wildly practical Nikola calls or puts as a way to ride shares lower or higher.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
