It’s stalled, but can it motor higher? The stock in question is Fisker (NYSE:FSR) and its in-tow FSR stock.
And based on what’s happening off and on the FSR price chart, the best course of action is to use those optionable safety features sometimes forgotten to avoid being a crash test dummy. Let me explain.
Sell the news? It could be that simple in shares of FSR. But you never know either, well until it’s too late.
Three weeks ago Fisker investors got a first glimpse of the company’s luxury Fisker Ocean electric vehicle (EV). And sell they did, with only gratuitous hindsight making it appear that selling the news was the singular course of action to take.
The fact today is FSR stock has managed to shed nearly 20% since unveiling its inaugural EV at the LA Auto show, despite receiving accolades for the vehicle.
Fisker’s Awarded With Profit Taking
The EV “asset-light” auto designer took home a prized ZEVAS Award for zero-emission vehicles in the category of “best crossover vehicle” priced under $50,000. Nice, right? I like to think so.
Still, in walking the aisle alongside FSR’s hefty bearish population of nearly 28% and investors caught taking profits, shares were up a near picture perfect 80% in just two months leading into the auto event.
So there’s that, right? I suppose.
As well and for FSR investors yearning for additional reasons driving the stock’s price contraction, fingers can be pointed at inflation fears, Fed-speak and most recently, the covid-19 Omicron varient in recent days.
It’s fair enough to say and see that many other EV plays such as QuantumScape (NYSE:QS) or Lucid Motors (NASDAQ:LCID), as well as other higher multiple growth plays have been hit by those macro irritants, putting them in the same miserable boat as FSR stock investors.
But it’s likely just a bump in the road when it comes to Fisker.
The thing is if you’re going to make a play on the next Tesla (NASDAQ:TSLA), investors would be hard-pressed to do much better than FSR stock, within the framework of an EV startup that’s yet to put the rubber to the road.
And I’m not alone in thinking that about Fisker shares.
InvestorPlace contributor Will Ashworth notes Fisker’s Ocean series has what I’ll just call the goods under the hood once production commences next November.
And with sales pegged at $2.2 billion for 2023, FSR’s forward price-to-sales ratio near 3x appears to an attractive value proposition for a growth stock of Fisker’s caliber.
FSR Stock Weekly Price Chart
Click to Enlarge
When it comes to owning FSR, I see a couple different ways to position for vastly-reduced risk and an eye on holding for a few years.
First, if shares can continue to retreat towards $15 – $16.75, purchasing FSR stock on weakness makes sense. This area has channel and Fibonacci support to back up the buy decision.
As well, a currently bearishly-crossed and overbought stochastics should, at a minimum, be in neutral territory. It could also be more opportunistically flattening or even generating a bullish buy signal, if shares were to decline into the support zone.
Like Will, I don’t anticipate FSR will see $10 again given its valuation and sales forecast. And if it did, it could mean some serious missteps by the company and more of a trap for buyers than of actual value.
That being said, I’d attach any potential purchases with a stop loss. Based on today’s channel, but also appreciating trader missteps have happened in the past like last October’s, $12.50 – $13 looks about right.
Alternatively, a fully-hedged bullish vertical or collar strategy rather than exiting on a technical failure might be considered.
Lastly, and given the reality that charts can sometimes turn on a dime, I’d simply watch for a stochastics crossover. A momentum move higher is always possible in a name like FSR.
Should that occur, placing an intermediate-term collar whose strike structure mimics an out-of-the-money bull call spread and adjusting the position over time is one way to avoid becoming a crash test dummy and hopefully enjoy some future vroom, vroom in FSR stock.
On the date of publication, Chris Tyler 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.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
