It’s difficult to identify an electric vehicle firm that’s more troubled than Faraday Future (NASDAQ:FFIE). Billed as a premium brand in the clean mobility space, it’s fair to say that FFIE stock hasn’t followed the anticipated trajectory.
During the past 52 weeks, shares lost slightly more than 99% of equity value. On an adjusted basis per Google Finance, FFIE stock traded hands at $65.30 one year ago. As early as May 9, the security had stumbled to 4 cents per share. Ordinarily, that would have been it. Fortunately, Faraday received a reprieve from the meme-trading phenomenon.
By May 20, FFIE stock closed at $1.80 a pop. Since then, the company has struggled to maintain this valuation boost. Although Faraday has enjoyed the extra eyeballs on its business, the reality is that it’s in deep trouble. For instance, the company has been late filing its first-quarter earnings report. Subsequently, it faces a possible delisting.
Faraday Future May Be Stuck in the ‘Falling Three Methods’ Pattern
On May 29, FFIE stock gapped down sharply from its prior session, opening at 82 cents and closing at 44 cents. The next day, shares responded with a decent performance, moving up to 57 cents. In the next two sessions, FFIE closed at 58 cents and 62 cents, respectively.
Throughout the three sessions starting from May 30, the intraday high never reached the May 29 opening price of 82 cents. According to the discipline of technical analysis, it’s possible that we could be seeing a pattern called the falling three methods.
Per Kotak Securities, the first candle in this five-candle pattern is long and red, meaning a robust downside. The next three candles represent small upswings that do not breach the line represented by the first candle’s opening price.
If this pattern is relevant, technical analysis tells us that the fifth candle – today’s candle – may also be long and red. If you’re strictly trading by the data, it might make sense to bet against FFIE stock.
Trade of the Day: Buy FFIE Stock Puts
Let’s be blunt: The idea of betting against securities is usually never popular. That’s doubly so for companies that have attracted interest among meme traders. However, the underlying business is arguably flawed. Not only that, short interest – which used to be sky high – sits at only 2.75% of its float, per Fintel. That’s nothing.
With the incentive to bet on FFIE stock gone, it may be time to go the other direction. For the trade of the day, speculators may consider buying puts. Specifically, the 19 July 2024 50 cent put looks appealing (from a gambling perspective).
The option features relatively decent volume for an extremely speculative trade. Also, the bid-ask spread as represented by the midpoint price of 8.33% isn’t bad at all considering the circumstances.
Of course, with the implied volatility at 434.44%, this trade can go either way. However, if you’re a believer in the technical approach, FFIE stock could be very intriguing as a bearish trade.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
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.
