Before we delve into the opportunity that exists in Canoo (NASDAQ:GOEV) stock, I’d like to say I dig their concept. The electric vehicle (EV) market is as hot as ever. After Tesla (NASDAQ:TSLA) broke down the barrier, the rest are trying to follow. The legacy automakers will be large players soon. But the bigger fuss now is around new names like Nio (NYSE:NIO), Fisker (NYSE:FSR) and Canoo.
Sadly GOEV stock has fallen onto hard times and is looking for footing. Today we will look for ways to invest in it.
The long-term thesis for the sector is absolutely legitimate. However, the short-term case is more certain for companies that are already selling products.
As for FSR, Lucid (NASDAQ:LCID) and GOEV, their future is still speculative. When I use this term “speculative,” it often invokes an emotional response from a stock’s fans. I don’t mean it as an insult — it merely describe a fact. Currently, Canoo has no sales. Yes, you can pre-order your vehicle, but the profit and loss statement has no income.
Therefore, most of GOEV’s stock price is based in anticipation of its success.
GOVE Stock: An EV Play With a Twist
Canoo focuses on the commercial side of the EV market. But it does so with a twist.
It has competition from Rivian and Workhorse (NASDAQ:WKHS), but GOEV plans on a subscription model, almost like a software company. So it will be interesting to see it perform with a carmaker. However, the company has still promised vehicles via traditional outlets. (Management even accelerated the release date from 2023 to next year).
The whole cohort of newcomers like this and Lucid have slick tech and sweet looking vehicles. True as this may be, it doesn’t replace actual dollars and cents. The valuation of a stock requires financial metrics; otherwise, it’s all subjective.
In options terms, price of GOEV stock is largely extrinsic. Luckily, the absolute value of the stock is low. Having a low ticket price makes it an easier bet to make. This doesn’t mean that its investors cannot lose, but the absolute value won’t likely break the bank.
So far I’ve established that the company is working hard toward a rosy future. Now let’s discuss the actual stock price action and find adequate levels.
GOEV peaked last December, then it tumbled as much as 75% into August. Since then, the bulls made progress and have had exciting rallies as much as 50%. They’ve given a lot of that back, but they are still making important improvements.
To be fair, at its peak there were headlines of a partnership with Apple (NASDAQ:AAPL). That’s a tough high to repeat.
The Technical Argument for GOEV
But here is the exciting part from a technical perspective. The range of GOEV stock has tightened-up drastically. In other words, it has gathered a lot of energy. This means that there should be a big move coming, but we don’t know in which direction.
Still we might have some sense of where things will go. Since its August lows, the bulls have sustained a higher-low trend in the stock. This gives them a tailwind to tackle the resistance near $9.20.
Above that, they can burst into another leg higher to the resistance at $12 per share. If and when they get there, I would expect sellers in droves.
That level has been in contention since the summer of 2020. I suspect that the battle there will be fierce. Therefore, this should translate into tremendous resistance. If the overall markets remain this bullish, I would guess the next move in GOEV is up.
Almost every time I write about an up-and-coming EV company, I inevitably upset a few readers. On the contrary, my intentions are merely to find the appropriate opportunities in them. To be clear, the message today is that investors should consider the two aspects of the opportunities in GOEV stock. First there’s the investment side, then there’s the trading side.
I’m not interested in investing in a company that is still in pre-production mode or has no income. That doesn’t mean it’s wrong to do so, but it’s not my cup of tea. However, I would absolutely join the bulls and trade the GOEV price action.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nicolas Chahine is the managing director of SellSpreads.com.
