Not all bottom feeders come back up for air. But when it comes to Hyliion Holdings (NYSE:HYLN), today’s investors should be breathing easier. 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.
ChargePoint Holdings (NYSE:CHPT). Luminar Technologies (NASDAQ:LAZR). Arrival Group (NASDAQ:ARVL). It hasn’t been the same type of bath many alternative energy SPAC stocks have taken in 2021. It’s been a much more painful and prolonged submersion over six months of deep diving price action and multiple decompression for HYLN shareholders.
Compared to the heavy breaking, U-turn like action in the aforementioned, which have produced stiff but fairly common corrective declines of around 60%, HYLN shares have lost as much as 82% at this past week’s low. The punishing collapse has also taken Hyliion’s valuation from the welcome mat of large-cap inclusion and narrowly into a larger sea of small-capitalization companies valued under $2 billion.
So, what gives in HYLN stock?
Market sentiment and wildly aggressive expectations certainly played a part. And its done so with support from a company-specific angle, as well as the broader take-down in electric vehicle stocks and SPACs this year. Joe Biden’s infrastructure, clean energy plan be damned, right? Maybe.
Hyliion’s Hypertruck ERX platform bills itself as a way to bridge the gap between fossil fuel big rigs and battery EV 18-wheelers. InvestorPlace’s Matt McCall has thoughtfully called the technology the “most realistic approach to a green roadway.” But the new administration’s greener future may not include natural gas. And that’s a potential roadblock for HYLN.
Federal Policy in the Making
Politicians of course are notorious for reneging on promises. And this past week Biden’s “American Jobs Plan” report appears to have abandoned a general election campaign pledge involving the natural gas industry and ensuring those pipelines will be relevant for decades to come.
In 2019, while on the campaign trail against other Democratic hopefuls, the Biden party line was to ban natural gas’ use of hydraulic fracking for production. But that kind of tough talk doesn’t sit well in what became a critical state to win the presidential election, i.e. Pennsylvania, and home to the massive Marcellus shale formation.
And today? Let’s just say there’s less political incentive to support a pledge made in the heat of battle.
The most committed vision of what going green today in the commercial trucking market looks like, isn’t functionally possible. Lithium-ion batteries, which muscle EV automobiles, aren’t anywhere close to being robust enough for the heavy-duty needs of a semi-trailer truck. Also, compressed natural gas or CNG, infrastructure necessary for Hyliion’s technology exists today.
With Congress still haggling over the administration’s big-ticket agenda, how the natural gas industry fares, and in-tow, HYLN stock, is still open to debate.
HYLN Stock Weekly Price Chart
Source: Charts by TradingView
Wickedly, in what’s turned into a poster child for bottom-feeding electric vehicle SPAC stocks, HYLN was a tortoise in name for a short while. Today’s shares are the result of a reverse merger with formerly listed blank-check company Tortoise Acquisition, which traded under the ticker SHLL. But Hyliion’s days as a deep-diving stock may be numbered.
Technically and as the weekly chart of HYLN stock reveals, shares have just completed a massive trip to levels associated with SHLL prior to news of a pending Hyliion merger last June. The result is a stock which has formed a massive double bottom that’s also beneficially supported by the shell company’s original public offering price of $10 a share.
The Bottom Line
In a perfect world, HYLN’s weekly hammer confirmation this week would be a bit closer to the $10 share level. The actual signal price is above $11.44 and roughly 11.50% removed from last week’s testing low of $10.08. As well, an oversold stochastics would also be bullishly aligned. But trading, as with life, is rarely about perfection.
Today’s overall takeaway is HYLN stock offers a nice and slightly less-speculative purchase when positioned with an intermediate bull call spread. One favored combination allowing time for the political dust to settle in favor of natural gas, maintains just over 10% stock risk and offers substantial, but realistic profit potential based on Hyliion’s rather large bottoming pattern is the January $15/$25 call vertical.
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.
