One of the hottest sectors over the last few years has been the EV sector. 

Led by TSLA, numerous stocks in the sector have shown multi-bagger returns. But are these stocks still good value, and are they likely to continue higher or lower in the short term?

I don’t let my biases get in the way of my trading. I let the fundamentals and technical chart setups guide me. 

TSLA is facing continuously increasing competition not only from legacy automakers such as Ford (F), General Motors (GM), Volkswagen but also new entrants such Lucid (LCID), Rivian (RIVN), and Fisker (FSR). I’m looking for both short and long setups in some of these companies.

Click here to see what exactly I am looking for to take a great trading setup in EV stocks.

Tesla

TSLA is holding a range between 1200 and 1000. I really feel like TSLA is about to break down. 

TSLA’s competitors are finally ready to begin and increase production. Companies such as (LCID), Rivian (RIVN), and Fisker (FSR) have raised billions and will finally be mass producing and pumping out thousands of electric vehicles. Ford (F) said last week the demand for their electric trucks was so overwhelming, they stopped taking reservations. This means they will be able to sell as many EV’s as they can produce. 

A lot of people who would have bought a TSLA 2 years ago now suddenly have a dozen different options. That is a lot of pressure on TSLA as they are no longer the only game in town. As a business, they have a lot of pressure moving forward, and I think that Elon knows it! The rate of growth as a company will probably not be what it was before due to the introduction of so many competitors. This is a long-term headwind that TSLA will face. 

Technicals

$950 was the panic low in TSLA. If $950 breaks, I expect TSLA to drop into the 800’s and eventually print 700’s. I think TSLA is in a bearish trend. TSLA is trading underneath all of the daily moving averages. $1000 is a major psychological level, if that gives way, I think we’re going to see a lot of selling. Any pops into the 1040’s or the 1060’s I am looking to get short by buying puts. I don’t think the trend is going to be up, I think the trend is going to be lower. 

I think funds are wanting to pull money out of this market by the end of the year. If you’re a hedge fund manager, you just want to cash in your Chips And go to the Hamptons! TSLA is up 70% since March, I expect funds to take profits. Elon Musk is looking to sell, he’s selling shares almost every day over the past few weeks. To me, if the CEO is looking to get out that’s a red flag. 

Elon Musk has got his reasons allegedly about taxes, but I don’t believe it. 

Elon’s selling stock, hedge funds are selling stock, around 10% of Cathie Wood’s own fund is in TSLA, and it looks like she is selling to meet redemptions. There is a lot of pressure on TSLA at the moment, I don’t think it goes back to $1200 and would be very surprised if it does. I think that by the end of January TSLA could be at the 200 DMA somewhere in the 700’s. 

Lucid Group Inc

Lucid (LCID)– had a big selloff after failing to hold and continue higher above $50. When you see all the daily indicators rollover, the stock is in a bearish trend. Once the stock holds below, as is with Lucid, it’s very difficult to break out above that. I’m looking for rallies into $45 to initiate a short position. 

I’m not looking to buy oversold stocks for a bounce into $45 against the trend; that’s not my game. I want to wait for the exhaustion to the upside, short, and then wait for it to come back down. My stop would be above the $50 level, that was a prior support level and should become resistant. If it fails to act resistant, I would stop out as it probably means the stock is going much higher than I had planned!

Rivian Automotive Inc

Rivian (RIVN) is a classic pullback pattern. Whilst I am bearish TSLA and LCID, if RIVN were able to breakout above $120, I would expect it to go higher, as short-sellers cover and momentum players step in. I think RIVN is overvalued, it’s a “dog-meat” company, but I trade chart setups and the psychology of traders. A hold above $120 could see a nice move higher in the short term!

Bottom Line

The EV sector has seen significant gains for many investors over the past year. As a whole, in the short-term, I believe many of the stocks in the sector are overextended and due for a pullback, such as TSLA and LCID. 

However, RIVN is setting up very nicely from a technical standpoint, and I believe that if it can hold above $120, there could be a significant upside from there. 

I DO NOT let biases get in the way of my trading decisions. I establish a thesis based on fundamentals or market psychology and wait for a trading setup that I believe offers great risk/reward.