An abrupt U-turn in shares of Fisker (NYSE:FSR) has turned some bulls into crash test dummies in recent weeks. But today and once more, FSR stock is in position to produce high-octane profits for investors. Let me explain.
If you’re a tech investor, it’s been a tough month. But some leadership from the likes of Microsoft (NASDAQ:MSFT) and in-line, but important strength from Apple (NASDAQ:AAPL), did allow the Invesco QQQ Trust (NASDAQ:QQQ) to gain nearly 1% on the week when all was said and done.
But not all tech is created equal. Along with shares of Tesla (NASDAQ:TSLA), which fell more than 5.50% for the period, luxury EV play Fisker proved immune to the QQQ’s shot in the arm as the stock tumbled nearly 15%.
What Gives in FSR Stock?
It could be about Tesla, actually. TSLA stock’s one-time halo effect has turned into more of a dimmer switch set to the off position these days. And it would be a mistake to think the EV market’s influential 800-pound gorilla didn’t have something to do with Fisker’s decline.
Tesla is set to release first quarter deliveries data this week. It’s an important report. And it’s likely investors were reducing exposure to TSLA, incentivized by 2020’s massive 695% rally and today’s less-friendly growth-stock environment.
As a smaller cap “asset-light” EV designer, FSR shares most often will be more volatile than TSLA stock. The fact remains that without a road-ready product of its own anytime soon, investors will invariably push FSR around as a sympathy trade barring any new company-specific developments. And last week there was little to celebrate. That’s not all, though.
Importantly, this past year’s thematic SPAC trade continued to be under pressure this past week and acting as another drag on FSR.
Arrival Group (NASDAQ:ARVL). Lordstown Motors (NASDAQ:RIDE). Churchill Capital (NYSE:CCIV). Blink Charging (NASDAQ:BLNK). ChargePoint Holdings (NYSE:CHPT). Misery, it seems, has a lot of company. It’s not much of a surprise, either. Given the rotation out of higher multiple growth stocks, this past year’s record flood of riskier SPAC offerings, many of which, like FSR, remain more concept than rubber on the road, have felt the unwanted side effects of a momentum trade that’s been victimized by its own success.
FSR Daily Price Chart
Source: Charts by TradingView
It’s been just over a month since making a bullish case for FSR stock at InvestorPlace. Since then, the strong retraction by investors out of growth stocks into more cyclical and value-driven names has resulted in Fisker shares peeling roughly 45% from their peak valuation on March 2. It hasn’t been all bad, though.
In front of today’s risk-off environment, a much quicker-than-anticipated rally in FSR of more than 42% ripped briefly through our detailed price target of $29 to $30. More appreciably, the reaction saw a proffered August $25/$35 bull call spread explode in value in less than a handful of days. Nice, right? There’s more good news on the horizon, too.
Back Up the EV on Fisker Shares
FSR is setting up as a bullish position where growth can be purchased at a substantial and attractive-looking technical discount. The daily chart reveals a pair of fairly substantial corrective bases (a “W” followed by a cup pattern) have developed into a healthy up-channel. And right now, the price action is offering a very buyable opportunity for investors.
This past Friday, FSR confirmed a new pivot low within the bullish price trend. This occurred as shares traded through the high of Thursday’s pattern bottom candlestick and finishing the session as a bullish hammer-like doji. With the pattern backed up by a test of Fisker’s 62% retracement level from late October and deeply oversold stochastics on the cusp of crossing over, the chance for a meaningful rally to take hold looks increasingly strong.
FSR Stock Positioning
Similar to our last analysis, I’m still a fan of a bull call spread. At the end of the day I’d like FSR shares to show investors the money and allow today’s price pattern to work for them, rather than absorb larger losses should the stock fail to improve upon the channel. Bearing that in mind, one favored strategy of this type which fits in well on the price chart and offers substantial profit potential while serving to severely limit downside exposure is the May $20/$25 bull call spread priced mid-market for $1.00.
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.