The stock market is having a bit of a tizzy in anticipation of a Federal Reserve meeting this week. The Fed will announce its plans on how fast it wants to control inflation this year. Meanwhile, investors are pricing in what is likely too much bearishness just in case. In other words, they are selling stocks indiscriminately and Fisker (NYSE:FSR) stock is one of them.
With that said, let’s gauge levels where it makes sense to anticipate support.
The macroeconomic conditions have not deteriorated. On the contrary, the Fed is looking to cool down a situation that’s too good to be true. The government may have thrown too much money at the problem, so now we go the other way. In reality, it makes sense for the Fed to be cautious with its tightening cycle. Also there are geopolitical fears brewing in several global hot spots.
Nevertheless, the anticipation is putting pressure on all stocks. This is especially true for budding small-cap companies like Fisker. FSR stock fell 24% last week, and now it is 62% below its all-time highs. During testy periods like these, it is difficult to justify catching risky falling knives.
Regardless of how good their cars may be, there is no financial statement to back up the stock.
FSR Stock Lacks Short-Term Help
The long-term these behind FSR stock might still be great. But the current fundamental metrics don’t offer a lot of short-term help.
This is nothing against the company efforts, but it’s more about tangible selling points. Fisker’s profit and loss statement this year will not show great ratios that inspire confidence. Therefore, most of Fisker’s stock price has to come from investor’s faith in the company.
For now, Wall Street is having a crisis of sentiment, so that faith is scarce. It will take a while for this to return to normal, so investors need to be patient. Jumping in too soon, or adding to current risk may cause short-term harm. The proper thing is to let this extrinsic risk abate a bit before taking on new risk.
Midweek we will find out more about how aggressive Fed Chair Powell wants to be. Maybe after that it would make sense to commit more money to FSR stock. The electric vehicle (EV) market outlook has not changed, but the stocks are under pressure now.
This is not faulty logic, and it’s reasonable to expect success to a degree. But Tesla had a slew of unique scenarios that are not going to repeat. Besides, and with all due respect to Mr. Fisker, there is only one Elon Musk. FSR stock may still have a good future, but I would avoid it a bit longer through this crisis. This is the largest equity correction in a while, and most definitely the most violent.
When there’s trouble like this, I prefer to wait it out or find better stock values.
Technical Support for Fisker Is Delicate
Technically, I wouldn’t mind considering FSR stock from a more solid base. Once it fell through $16 per share, it may have targeted single digits. The last time it fell below $10 per share, the bulls rallied it back up with fervor.
Somewhere between $12 and $10 there are buyers lurking.
But even still, we cannot discount a market crash that could bring new lows. For now, I’m not condoning shorting FSR stock, but patience might be the better course of action. If you’re long the stock already, it is viable to stay in it. However, do not to add to your position during this crisis.
The rally out of the pandemic on Wall Street was extreme. As a result, we still have potentially much more hot air to give back. Fisker stock does not trade in a vacuum. Any further downside in the indices will drag it down too.
Ultimately, I would rather miss out on upside then find myself holding a large bag for a long time.
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.