For a short while, it was a tortoise in name. And over a longer period it’s become a bottom-feeder of sorts. But when it comes to tomorrow, can Hyliion Holdings (NYSE:HYLN) change its ways and turn into a bull in 2021? Well, let’s take a look at what’s happening off and on the price chart of HYLN stock, then offer a risk-adjusted determination aligned with those findings.
This past year was a great year for special purpose acquisition (SPAC) stocks. Specifically, when it comes to electric vehicle (EV) stocks. That’s even true for more than a few in the group, which fell on tougher days in the final stretch of 2020.
But in a market made up of stocks, some of the group’s promising upstarts hit more than just a short detour. Among those is the shell company formerly known as Tortoise Acquisition, which spawned today’s renewable natural gas SPAC play Hyliion Holdings.
As inferred, you can’t feel completely sorry for Hyliion investors. Well, some at least.
In 2020, shares still climbed about 65%. That’s way better than the broader market of course. The performance crushed the SPDR 400 Mid-Cap Growth ETF (NYSEARCA:MDYG) more than three-fold. HYLN stock also topped the tech-heavy Nasdaq Composite’s stellar 44% by roughly fifty percent. Next to its closest peers, maybe some pity is justified though.
Moreover, HYLN stock’s gains pale by comparison to the electric vehicle market’s 800 lbs. gorilla Tesla (NASDAQ:TSLA) and its 700%-plus return. As well and relative to triple-digit and larger gains of its more immediate peers like Workhorse (NASDAQ:WKHS), Blink Charging (NASDAQ:BLNK), Lordstown Motors (NASDAQ:RIDE) or Switchback Energy (NYSE:SBE), Hyliion shares were a bottom-feeder of sorts.
The billion — or more aptly the near $2.8 billion dollar question — given HYLN’s current valuation is whether investors should let bygones be bygones? Can the Hyliion’s Hypertruck ERX platform bridge the gap between fossil fuel big rigs and battery EV 18-wheelers?
And for investors, is Hyliion in position to reverse course in the direction of last year’s most excited days — when shares fetched nearly $59 and more than 60% removed from today’s sinking?
Well, InvestorPlace’s Matt McCall cautiously makes the argument in favor of greener days ahead.
Matt and his team recently discussed Hyliion’s hybrid solution as the “most realistic approach to a green roadway.” It flies in the face of what some of the stock’s bears think. Some believe the company is a lesser alternative technology. And others allege its efficiency gains of 30% for its ERX platform, which can be retrofitted to any Class 8 diesel truck, defy the laws of physics.
That said, the reason Matt remains positive on HYLN stock is two-fold. First, the cop-out argument over using hybrid technology versus full-blown electric vehicles in the large-scale transportation market doesn’t hold water. Today’s lithium-ion batteries, which are the muscle behind EV automobiles, aren’t anywhere close to being robust enough for the heavy-duty needs of a semi-trailer truck.
Secondly, even if the day comes when EV technology can make that leap, there could be electric grid issues. Moreover, compressed natural gas (CNG) infrastructure is already developed and Hyliion’s approach can feasibly tap into this as we speak. Hybrid technology may not be the flavor of the day on Wall Street, but a nearby reality check would have a way of changing sentiment and quite possibly, some well-positioned and opportunistic price action in HLYN stock.
HYLN Stock Weekly Price Chart
Overall, what was known as Tortoise Acquisition has become a bottom-feeder of a stock for many of HYLN stock investors currently underwater. The “hard-to-feel sorry” 65% returns expressed earlier aren’t a reality for anyone holding shares above today’s stock levels, let alone near Hyliion’s all-time-high. Like Matt, though, I’m upbeat HYLN stock can turn things around given the forceful correction.
Technically, and as the illustrated weekly chart reveals, the 70% decline from Hyliion’s September high has resulted in shares challenging support from last summer as the stock pulled back during its massive run-up. The testing so far has morphed from a confirmed lower-low, double-bottom variation into a few weeks of lateral congestion inside the prior pattern’s second pivot low. It’s been a true bottom-feeder to be sure.
With that in mind, instant gratification out of the double-bottom would of course been nice for those positioned in HYLN stock. But if we’re to trust time heals all wounds, what’s become a longer period of technical price gestation could help. Also, the weekly stochastics is bullishly crossed over in oversold territory and increases the chances a bottom is at hand.
One favored combination for exposure to Hyliion is an April $20/$30 call vertical. This limited and reduced risk spread looks well-aligned with the possibility for better days ahead without getting too far ahead of ourselves. As well and priced at roughly 10% of Hyliion stock’s price, investors won’t break the bank in the event the greener days we’re anticipating remain M.I.A.
On the date of publication, Chris Tyler does not hold, directly or indirectly, positions in any securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.