In spite of the explosive growth in the electric vehicle sector, ChargePoint (NYSE:CHPT) stock is down 40% year-to-date.
What makes matters worse is that the interest in it is booming in pursuit of their leader Tesla (NASDAQ:TSLA). Sure, CHPT stock was up 7% yesterday. While this was great news for investors, it came with an asterisk considering the market-wide rally. Moreover, the whole cohort soared disproportionately to the indices and the numbers were astonishing.
The pack leader TSLA broke records +12% behind the strength it gathered from its earnings report. XPeng (NASDAQ:XPEV) and Nio (NYSE:NIO) were also up 11% and 6% respectively. Others like Blink (NASDAQ:BLNK) were up 4.4%.
Sticking with the facts, CHPT stock is not having a good year. It is not alone there, so that’s not a reason to discard the idea of upside yet. My spoiler alert is that the fans of it have valid reason to still hang on to hope. This however could require patience, so time must not be of the essence with that trade.
Holding the equity should be an easier trade to manage than buying call options.
CHPT Stock Trims Down
Down more than 50% since its January highs means that CHPT lost a lot of froth. The positive spin on that is that it is now leaner and less susceptible to big drops.
The stock basically went back to its 2020 base for better footing. Besides, much of this is not through much fault of its own. Since the pandemic, investors piled into dozens of questionable tickers, and most hadn’t proven themselves yet. Relatively new investors put too much faith in the upside potential of a large group of stocks.
This is especially true for those companies who are in the EV realm. ChargePoint is one and after much failed exuberance from December, the stock is now trying to find footing. The extremes are rarely correct and eventually somewhere in the middle will lie the truth. On Wall Street especially, investors tend to overdo it on both sides. It will take a while to find a good balance. In the meantime, there are ways to trade CHPT stock at these levels.
First, the potential investors have to determine their timeline with it. Those who are looking for a long-term commitment can take starter positions now. Then it would be up to the company to sway them on how to manage it going forward.
Conversely, shorter-term traders should worry about the battle over $25 per share. It has been pivotal in the past, so I expect there will be sellers lurking there. This does not mean that it’s a good idea to short it. Quite the contrary, because the sector has very avid investors.
Case in point what happened to Tesla yesterday as it broke above $1,000 per share. This trading group of investors should have some knowledge of the charts. Otherwise they’re at a disadvantage to their opponents. Yes, investing in stocks is a competition because for every seller there is a buyer on the other end.
Management Must Rekindle the Interest
The ChargePoint fundamentals are too new to make or break the thesis. It will need time to develop a track record as a public company.
In the meantime, CHOT stock is not cheap because much of the stock price comes from expectations of future successes. The current P&L is too small to use as as a fair gauge for much of anything. Until then, the clues lie in the stock chart.
On Sept. 2, the bulls had a major failure at $24 per share. That is where they will face their biggest test next. If successful, then they can repeat the process at $26 per share. At that point the opportunity becomes critical. Because that would be the best chance for them to break out of this descending channel that started last December.
So far, my comments have been more short term than not, but that’s because of the nature of these stocks. They rally fast in both directions and the battles are tightening.
In this day and age, machines are responsible for most of the price action. Therefore, it is worth the while to review the data in the charts. They are what machines use, and turning a blind eye to them puts ourselves at a disadvantage.
Regardless of method or timeline, investors in CHPT stock should not have extreme confidence in their positions. I would give the upside opportunity medium conviction at best. The indices just broke new records, so at these altitudes caution would be a good idea.
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.
