Some are issuing warnings and others are simply letting bearish positions against Churchill Capital Corp (NYSE:CCIV) do their bidding. But bullish investors appear to have the upper hand in CCIV stock and one worth buying into today.
Source: T. Schneider / Shutterstock.com
Let’s examine what’s happening off and on the price chart, then offer a risk-adjusted determination aligned with those findings.
CCIV stock. Out-of-the-gate in 2021 Churchill Capital became the “it” stock for momentum investors latching onto the next big thing in green technology. In early January and in just over a month’s time, shares soared nearly 550%. Driving the confident rally, the blank-check outfit announced a merger with luxury EV play Lucid Motors EV.
The $10 SPAC had found a mate. And a great one at that.
CCIV Stock and the Deal
Amid a flood of EV stocks brought to market in 2020 vis-à-vis SPACs, Churchill’s Lucid Motors presented the chance to bet on industry pedigree with Tesla’s (NASDAQ:TSLA) former chief engineer Peter Rawlinson at the helm.
Also a positive, CCIV wouldn’t keep investors waiting. Lucid’s Air and Dream Edition EVs were set to debut in late spring and well-ahead of competition such as fellow SPAC Fisker (NYSE:FSR).
What could possibly go wrong, right? A great deal as many CCIV stock investors soon found out.
A broader systematic rotation out of higher and no-multiple growth stocks beginning in mid-February certainly worked against CCIV. Then in tow, Churchill’s announced the terms of its Lucid deal. And given poor market sentiment at the time, the richly priced agreement became a much larger point of objection for investors.
Challenging conditions and issues continued to grow for Churchill’s Lucid Motors as well.
Over the ensuing couple months, word that Lucid’s Dream Edition would be pushed out into 2021’s second half, a semiconductor chip shortage hanging over automakers and further production schedule backtracking all conspired against CCIV stock. And by early May shares of Churchill had tumbled 73% to a low of $17.25.
Then and just when it may have seemed terminal, CCIV turned the corner.
Dismal market sentiment and prior investor fears began to lift by mid-May and a rally emerged. And in more recent days Churchill persisted in improving its position.
This past week, CCIV updated Wall Street stating it topped 10,000 paid reservations for its Lucid Air. Additionally, the company opened a flagship studio in NYC and showed off its EV to much praise. Lucid also announced its fast-tracking production plans and accelerating the use of about $350 million directed toward manufacturing capacity to keep up with strong demand for its EVs.
Churchill Capital also announced the Securities and Exchange Commission approved its merger proxy statement.
Some Bears Not Giving Up
Despite the wins, good news and generally stronger investing environment for CCIV, some bears aren’t giving up the ghost yet. Shares of Churchill maintain short interest north of 17% and possibly as high as 22%, according to Yahoo Finance. Either way, it’s well-above average.
Arguably, a great deal of CCIV’s bearish positioning could have something to do with today’s implied $38 billion valuation, as InvestorPlace’s Joanna Makris notes.
Churchill shares are steep relative to diversified auto giants Ford Motor (NYSE:F) and General Motors (NYSE:GM). CCIV stock is also rich compared to Tesla. TSLA stock maintained a similar valuation in 2017. And mind you, that was after one or more of your neighbors, if not yourself, already had a Tesla parked in the driveway.
CCIV Stock Weekly Price Chart
Source: Charts by TradingView
The good news for investors wanting to buy into Lucid Motors is you don’t have to expose yourself to larger existential threats. That is, if you permit yourself to rely on the CCIV stock price chart, but ultimately allow Churchill’s options market to do your bidding.
Technically, shares of CCIV have successfully broken above a prior downtrend lines since bottoming in early May. Today and as the weekly chart reveals, shares are following through on a pair of successful testing candlesticks, which challenged an emerging uptrend line, as well as prior trend resistance.
Net, net the evidence is building Churchill’s bearish short-interest is on the wrong side of the trade.
Classically, the next test for CCIV stock is for shares to rally above its June high and form a higher-low if we’re to see a textbook uptrend pattern. But it doesn’t have to play out like that. Charts and patterns are subject to revision. And even when we get the direction correct, that path there doesn’t always look like the one we imagined.
One way to take advantage of that uncertain volatility without fear of playing a CCIV stock position too tight to the vest is with a dynamically-adjusted, limited and reduced risk collar strategy. Today, and given what we’re seeing off and on the price chart and appreciating the unknowns as well, the October $30/$45 collar combination is a favored starting point.
On the date of publication, Chris Tyler holds (either directly or indirectly) positions in Ford Motors (F) and its derivatives. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
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