You don’t have to look too far to find problems associated with electric vehicles, which bodes poorly for EV charging specialist ChargePoint (NYSE:CHPT). As The New York Times recently detailed, sales are clearly decelerating from their peak. Legacy automakers have begun delaying or scaling back their electric transition plans. Still, it’s possible that adequate charging solutions is the issue, which may then benefit CHPT stock.
As the Department of Energy stated, many drivers are hesitant to make the transition to electric cars because of range anxiety. As the agency notes, this fear doesn’t just center on the capacities of the vehicles themselves. Rather, it’s a holistic concern. If a driver’s lifestyle requires extended trips in areas of inadequate charging, that would be a major issue.
It’s really a serious problem that deserves careful thought. First, not everyone has access to home charging solutions. We know this because about two-thirds of U.S. housing units have a garage or carport. That still leaves quite a few folks without such accommodation.
Second, drivers of combustion-powered vehicles don’t give a second thought about finding adequate infrastructure. There’s always a gasoline (or diesel) station somewhere. In order to provide a similar level of comfort, adequate charging is a must. That’s why CHPT stock could potentially be a long-term investment.
The Short-Term Outlook for ChargePoint Might Be Positive Too
Now as day or swing traders, you’re not really looking too far out into the future. What makes CHPT stock intriguing for speculators is that its short-term outlook appears positive as well.
First, the baseline price action for ChargePoint shares has stabilized around where they sit right now (closing at $1.68 on Tuesday). There have been efforts by the bears to drive the price close to the $1 level. However, the bulls have been resilient, aiming to push the price back toward the psychologically significant $2 level.
Second, there’s a possibility that some bears could be tired of targeting CHPT stock and are moving onto other ideas. I say that because CHPT stock represents one of the “lowlights” of Barchart’s unusual stock options volume screener. This interface shows unusual volume activity for various options, potentially indicating what the smart money is doing with its funds.
Options volume slipped for CHPT stock slipped almost 73% below its trailing one-month average. That might indicate a lack of interest in the derivatives side of the equation.
To be sure, there are traders that are directly short CHPT stock in the open market. Fintel reports that CHPT’s short interest stands at 27.13% of the float. Also, the short interest ratio clocks in at 8.91 days to cover. These stats are setting up a tantalizing contrarian opportunity.
Trade of the Day: Buy the $2 CHPT Stock Call Option
Ahead of the Wednesday open, we have three potential catalysts for CHPT stock:
- Psychological “demand” to push the price to $2.
- Lack of interest in the derivatives market.
- High short interest in the open market.
Given the low price and the sub-billion-dollar market capitalization, it might not take much to see CHPT stock shoot higher on a contrarian move. Therefore, the trade of the day involves acquiring $2 call options, specifically the call that expires on Aug. 16.
Granted, the trade is risky. With limited volume and extremely high implied volatility, this contract could move wildly in either direction. However, the bulls will be banking on a combination of the fundamentals (i.e. the need for wider charging infrastructure) along with the psychological catalyst of preferring whole numbers (thus targeting $2.00 instead of $1.68).
As always with penny stocks, exercise sound judgment and never bet more than you can comfortably afford to lose.
On the date of publication, Josh Enomoto 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.
