Another Look at Nikola's Decline

Is there a 'white knight' out there to replace GM?

When we last updated our views on Nikola (NKLA) on Nov. 30 we wrote: "Traders should have exited the long side on NKLA on Friday. Traders and maybe investors will be altering their ideas on the company Monday so avoid new positions -- a lot of dust needs to settle."

With prices down at $14 or so now a Real Money subscriber asked if this was a "worthwhile speculation." I think that is the first time I have seen those two words together in one sentence. 

Let's check on the Nikola charts again. 

In the updated daily bar chart of NKLA, below, we can see that the shares have been moving lower and lower and lower since June. The slope of the 50-day moving average line is negative and has been since the middle of August. The slower-to-react 200-day moving average is about to turn lower.

Trading volume was extremely heavy in September as prices plunged and again in late November. Oddly, the On-Balance-Volume (OBV) line has zigzagged higher since May. Normally I would expect to see a long decline in the OBV line.

The 12-day price momentum study in the bottom panel of this chart shows a higher low from September to December even though prices made a lower low. This means that the pace of the decline slowed. A slowing pace in a decline would normally mean there were scale-down buyers slowing the descent but in this case I wonder. 

 

In the weekly chart of NKLA, below, we get a little different perspective. Here we see that the 40-week moving average line has turned lower and the OBV line has turned to the downside telling us that sellers of NKLA were more aggressive.

 

The 12-week price momentum study shows that the pace of the decline has been slowing. Do not count on the lows around $10 from March/April to act as support.   

 

 

 

In this daily Point and Figure chart of NKLA, below, we can see the decline without price gaps and volume. The software is projecting $0 -- zero -- as the downside price target.  

 

 

Bottom-line strategy: NKLA had a spectacular rally and a drawn-out decline. The pace of the decline has been slowing with the daily On-Balance-Volume line not moving lower in a big way. Odd. Is there a "white knight" out there to replace General Motors ( GM) ? I have no idea and I am in no mood to recommend a stock in a downtrend. 

 

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