The electric car companies have been surging week after week. 100% here, 100 % there. We have been seeing these massive price changes, even though the companies may or may not have started production. I need to ask the question, when do we start seeing some electric vehicle breakdowns?
While I continue to expect growth in this area, it will separate the winners and losers. We have luxury car manufacturers trading under $1.00, and scooter companies trading 30 times that.
Take a look at a few names starting to appear on the investor version of an electric vehicle breakdown.
Here is a merger with a SPAC firm, CIIC, where they have taken an interest in the British EV manufacturer, Arrival. From $10 to $34 and back to $20. Not quite a roundtrip, but the investor marriage is looking more like an investor electric vehicle breakdown. Link.
When we see so many of these SPAC’s surging then retracing, in many cases it will prove to be the analogy of Marijuana names. One of the bright light examples is when Tilray’s President said he expects TLRY to be a $100 Billion company. Here is the chart with the current Market cap at $1 Billion. This is what we are trying to avoid. We do not want to end up holding through a move like this. From $20 – $300 is fine, but $300 to $100 in a few days was painful. It ended up being almost 90% off the original IPO low at $2.50. That looks like an investor breakdown. Link.
So how do we avoid this? Looking for general weakness can be a clue in the group. Below I have posted some of the daily charts for the high-fliers.
Here is NIO, one of the biggest movers. We are getting a PPO cross down and it is breaking the momentum uptrend line. This looks like an electric vehicle breakdown to me. We don’t know if it will have another rally or how soon, but this looks weak. Link.
Here is Lordstown Motors (RIDE). This has a different configuration. This is called a double top. Price tries to take out the prior high, gets close but loses momentum, then falls away rapidly. This is over 20% off the highs within 5 days. Link. Looks like another electric vehicle breakdown.
Li Auto (LI) has the same problem as NIO going on here. Link. Electric vehicle breakdown.
I’ll wrap it up with SOLO. This stock has been a great performer flying up 500% in 18 trading days. The difference this time around on the small pullbacks, is that the pullbacks are happening on all the charts together. I would rank this as another electric vehicle breakdown. Notice the PPO soaring on these charts only to roll over together across the group. Link.
In the newsletter on the weekend, I mentioned that these manufacturers were starting to roll over. From the November 29 member newsletter:
“After the significant surges in these vehicle manufacturers, many of them are starting to pull back and consolidate.”
The important thing to remember in these fast-moving names is to take profits quickly. To conclude, I think the charts are telling us the electric vehicle breakdown is becoming widespread on these fast moving names. There are lots of different ways to play this electric vehicle theme, and Elon Musk said he thinks electricity grids will have to double worldwide. The weekly newsletter at Greg Schnell.com covers other ways to play this theme.
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Greg Schnell, CMT, MFTA