Electric vehicle stocks of all kinds were red hot in 2020 despite the occasional unplugged price action and universal volatility. And that includes Kaixin Auto (NASDAQ:KXIN). But as the new year gets underway, what should investors expect from KXIN stock?
Let’s look under the hood, both off and on the price chart, then offer a risk-adjusted determination aligned with those findings.
Investors have a plethora of stocks that are tethered to the EV market. Want a play on delivery trucks? Look at Workhorse Group (NASDAQ:WKHS). Think batteries are where the opportunity lies? There’s QuantumScape (NYSE:QS). Looking to “charge” the portfolio? Blink Charging (NASDAQ:BLNK) has something for you.
A couple of the mentioned EV stocks are obviously recognizable. Tesla, now a component of the S&P 500 index, was also the index’s best performing stock of 2020 with gains north of 700%. In selling nearly 500,000 vehicles last year, the brash auto company also set the gold standard of what’s possible. But that success has allowed many more questionable stocks — like Kaixin Auto — to thrive under what’s sometimes called the “Tesla halo effect” and unequivocally a period with many bubble-like characteristics.
KXIN stock, despite some bumps in the road, managed to catch a ride and double in price over the last 12 calendar months.
Unknowns Around KXIN Stock
So, who or what is behind KXIN stock? It’s a question some professionals like InvestorPlace’s Mark Hake are asking. On paper, Kaixin operates as a used car dealership chain in China. But a micro-cap valuation of roughly $225 million and foreign status is a combination where the quality and quantity of information available is often compromised or absent. And KXIN doesn’t appear to be an exception.
One thing we do know is Kaixin is a subsidiary of a failed social media company called Renren (NYSE:RENN). If at first you don’t succeed, try, try again? I’m unsure the timeless and encouraging proverb applies. As well, Kaixin has cozied up with a new majority shareholder by the name of Haitaoche. Mark stresses the “sales, size and profits are a mystery,” but we’re expected to trust is an e-commerce platform for imported EV cars? Yeah, there could be a lemon on the EV lot from last year’s hot deals. And it’s reasonable to assume the ticker is KXIN.
KXIN Stock Weekly Price Chart
Source: Charts by TradingView
Despite our obvious concern regarding Kaixin’s financial background, the price chart is invariably going to draw the attention of speculators. It already has. As a low-priced, low-float stock, KXIN is a volatile mover capable of high-octane price swings and fast profits for nimble traders with no commitment to a longer-term position.
Technically, and with caveats in place, some of the requirements for another upside reaction are taking shape. There’s an interesting triangular consolidation. Coupled with successful lateral testing, pinched Bollinger Bands, a bullishly divergent stochastics indicator and combined with KXIN’s built-in micro-cap characteristics, it’s easy to anticipate another forceful but likely fleeting rally could reasonably be in the cards.
Looking forward, a rally to $6 or even $8 isn’t out of the question if fuzzy price resistance near $4.25 – $4.50 is cleared in the near future. And bottom-line, without passing judgment, relative to estimated risk of about 30 cents to maybe $1.00, depending on a trader’s risk tolerance, that makes KXIN a decent fast money proposition.
On the date of publication, Chris Tyler held, directly or indirectly, positions in Nio (NIO) and its derivatives, but no other 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.