On Wednesday, Sept. 22, Schaeffer's Investment Research's Senior Market Strategist Matthew Timpane, CMT, was a featured presenter at the Benzinga Electric Vehicles Conference. Here is the full recording of Timpane's presentation for your convenience:
Presentation transcript:
Thanks for having me. Schaeffer’s Investment Research has been the leading name in options trading research for over 40 years now and we are very well known for our exceptional analysis looking at opportunities, whether it's you know other sectors or EV markets. As traders we do like volatile markets so the EV market is right up our alley. We're in and out of the sector, the industry on many trades upside and downside. So, today we wanted to kind of give you a trading perspective from this so we're Looking for ELECTRIC Opportunities in the Market.
One quick thing that I would like to just kind of go over quickly. You know, these two weeks that we're in kind of right now after September's options expiration week is one of the most volatile periods of the market throughout the year, when we look back on a 10-year horizon, we're roughly down about almost 1%, through the end of September, but it really shouldn't be scary in the long run because through October we're actually up almost about 1%. So, you know, What we currently look at this as it's volatile, but it's an opportunity, possibly for areas of the market to be able to buy.
So, the EV market in specifically even the speculative EV space. We actually aren't seeing that much volatility in that area because they've kind of been through a consolidation and correction phase throughout most of the year, so we're actually seeing strength in some areas there. And on the sell offs, they're not selling off as much as other things that have appreciated this year so we could be seeing possibly larger term bottoms in these stocks, where we could get some of those big rallies that we're seeing. Last year prior to 2021.
So just kind of a broad, quick market overview I'm sure a lot of people. I know a lot of this information already but for those of you that don't governments you know are across the globe are just making a major turn towards fostering low carbon society so the EU actually has announced on July 14 proposal that will effectively in the sale of all passenger cars except for EVs from 2035, going forward with a gradual phase out of internal combustion engines and hybrids over the following 10 years. Biden also signed an executive order on August 5 targets and make half of all new vehicles sold to be put in 2030 emission free. This is really kind of consistent with his goal of building more than 500,000 EV charging stations throughout the country, along with 7.5 billion earmarked in an infrastructure plan for to make electric public buses and transportation as part of that larger infrastructure plan.
Japan is also targeting 100% electrification by the year 2035 And the UK in the past year has accelerated their sales ban on internal combustion vehicles to 2030 in hybrids will be in 2035, you know, these are the type of goals and legislative maneuvers that are causing many of the Wall Street's investment banks to raise their EV demand forecast by as much as over 20% for years 2025 and 2030, as they now kind of expected EV uptake to advance quicker than previously expected to me, sometimes it's the personal interactions that can really make you see that adoption of certain technologies will be much greater than most expected.
For me this is actually when my father was a Vietnam War veteran and a minor for over 50 years, who's amazing was still working, you know, kind of grew up during that classic muscle car era the 50s and 60s and 70s, leans over to me and goes, that new electric Ford truck looks badass, I mean that, you know that's kind of just a big signal to me. One thing I would say out there that just kind of put as like a something that you might want to put on your horizon for concern. We're going to expect a really tight supply for batteries, I think, with demand increasing possibly, you know, to the hyper adoption scenarios that that supply could get pretty tight.
So while the cost of making battery cells has declined 97% Over the last three decades, there's still a small risk that you know commodity inflation if that's really here to stay, could be the first time in a very long time that you actually kind of see some increase in battery prices, or don't worry about it too much though, this possibility I would just put this as an outlier. That, that, you know, Something just always keep on your radar. Let's get to the charts.
One of my favorite ETFs to get into the space for longer term accounts IRAs or long term even individual joint accounts, type of thing as The Global X Autonomous & Electric Vehicles ETF (DRIV), it already has over 1 billion in total assets at sub 67% year over year, Tesla Inc (NASDAQ:TSLA) is the top holding, but in my opinion it's a very well diversified ETF for long term exposure to the AV industry companies include major auto companies semiconductors battery and fuel cell power plus material and other component, providers, so you even have companies in there like Apple, Microsoft, Google, and video from for Mac route that can help keep the ETF state stable when the EV, specific companies kind of hit a rough patch, but you're still going to be able to gain exposure to speculative EV stocks like D li or quantum escape. So as you can kind of see it kind of moved far away from like a technical perspective, from that 200 day moving average. That's exactly where it kind of bottomed recently. So this consolidation was really warranted over the past year, as it's moved so much from those pandemic lows.
If for some reason we do get a move lower, as we go through this volatile period, I would probably target the 10% year to date, area here on this chart, it's the 25 to $26 range area. As you can tell it's found support there multiple times. So that's where I would do it probably put like a stone at 2450 because if for some reason we do kind of break below this area, you know, there's a good chance you'd probably go the $20 level and settled 160 1.8 Fibonacci extension level, it's a 50% kind of retracement level from trough to peak here from those lows the highest, so it makes really sense that, that'd be an area that you would go to if for some reason we broke down.
Looking at it from a like a relative basis you can see it's been consolidating as the S&P 500 has been outperforming, but it's in a classic you know lower highs pattern, it kind of breaks out of this, this is where I think the ETF once again will start outperforming the broader market.
If we head over to another ETF, The Global X Lithium & Battery Tech ETF (LIT). This is up about 25% year to date, it's another great year for that long term exposure that you want to the EDI industry, it has about $5 billion in assets, two of his largest holdings, being Elba Merrill and BYD are two companies I'm pretty bullish on in the long term. So let's recently found support, oddly enough, at its 20% year to date level, that just happened to be that 80 day moving average. Throughout time and this has been a significant moving average for the ETF, so you can see that it kind of caps gains here when it's kind of going through a little bearish phases, and it's also marked plenty of bottoms throughout time, when it's in a bullish phase. So, this could be the spot right here it could have just been, and we could be going higher, but if we did break down, you know the next year I'd be looking for is the 75 mark. It's kind of in that longer term uptrend from that pandemic low area. Yeah, it will have a rising 150 day moving average there.
And it's kind of that 361 Fibonacci extension level, so it'd be logical, we already found support there once earlier in the summertime. And so that could be a good area to add exposure to this ETF. Again just pulling up a relative chart, you know, many might call this double top I don't really like doing chart patterns really on relative charts, I look more for like horizontal support and kind of resistance levels, you know, but you saw the kind of forms big base area here. So if you even if it pulls back a little bit you'll be perfectly fine. You know if it breaks out over this level you'll start seeing that outperformance once again in this, in the lithium ETF as I don't think this is a move that's going to be going anywhere shortly, it's going to be a lot around for a long time.
So, I know I probably missed a few companies here on the easy automotive returns, I think we automotive, a few others, but I just kind of want to give you an idea of whatever the company has been kind of doing that are specific to the cars and automotive industry. So, on a year to day basis. Another thing is, you know, GM is targeting selling only emission vehicles by 2035, and then Ford is targeting, I think it's 40% of new vehicle sales to be fully electric by 2030 Volkswagens 20% 2025 and 50% by 2030 so, you know, you don't want to ignore the old dogs that are out there. You know, so the New Kids on the Block are really attractive, since there's so much more upside in the TV space, but you can't forget about both the stalwarts, you know they have capital, and the ability to ramp up infrastructure, and be able to supply the public of the demand that they want. So diversification in my opinion on longer term portfolios even a shorter term is a way to go when playing the DVDs, but we'll stand up this has been said, as they are targeting a production roll up by end of the year and is now 167% year to date as of yesterday, I believe that's kind of closer to 150% year to date, day.
Ford Motor Company (NYSE:F) also kind of stands out to me as, you know they're going to be the first truck to market, as you know, that's something that, you know my father loved and, you know, for somebody like that to say something like that. You got to kind of take recognition of that. And we know America loves trucks in general so I think that's something you want to keep on your Horizon. When you're looking for building a portfolio around EVs.
battery and fuel cell power you today timeframe is kind of sitting here, you know, somewhere up somewhere down this year it's kind of been a mixed bag, last year's big winner was Blink Charging Co. (NASDAQ:BLNK), which you know is up still up over 70% year over year. This year is kind of struggle and we're seeing other winners emerge in the space that elbow marrow live and lithium America's ticker, we just la see. So you're seeing some movement around, you know, what you'll probably likely want to do is towards the end of the year started looking at the dogs kind of of this area as funds may try to get back in after a year's worth of consolidation or pull backs in some of those ones that aren't doing so well this year. And then just I want to throw this quick slide out here because he these, you know when they're in, you know, a bear market whether it's cyclical or secular, you can always look for exposure to the industry through semiconductors to at least gain a little bit of that exposure that you want in your portfolio. It's not something we can elaborate too much, but the standouts to me would be NXP AI on semiconductors sky works with a recent acquisition of slap my and TSM as they're going to likely be needed to provide more low cost chip manufacturing as the automotive and markets will grow their management actually recently stated that their their segment is that segment is on pace for 20% year over year growth.
So, get some charts of some companies that we like. Would it be a conference without looking at a Tesla Inc (NASDAQ:TSLA) chart, you know, it's kind of sitting here in this channel going back and forth, after finding this base here, oddly enough from a traders perspective what we saw was this was minus 20% year to date level. Now it's just kind of riding this channel up and down finding support will break through the 200 day level, but right now it's at your today breakeven, It's kind of been holding that even amid this volatility the last few days. It's also got the rising 20 day as we know it does love to hold on to that in bull rallies. What we really want to see is a breakout above the 7080 level here, that would really probably give Tesla going again. But there is good catalyst I mean you have a buy to open 10 day per call ratio at point nine two that's in the 89th percentile options are pretty cheap, they're being priced in the sixth percentile, and we have a massive peak put level down at the $700 level right here it is right in this channel, And with that 200 day moving average. If we did for some reason break below that level. That's when you'd want to kind of just get out of that stuff out of it. You do have significant downside risk then when it breaks those peak levels. So, you know, we can easily see 565 80 range or even 500. But you know analysts are very still mixed on Tesla because it is outperforming, and it's an expensive stock but it's expensive for a reason. So those are our thoughts here on Tesla and let's look at a few others.
One of my favorites is Lucid Group, Inc. (NASDAQ:LCID), obviously a lot of it's been in the news a lot lately. Wall Streets Bets is kind of getting on this now so unfortunately, they beat me to it, before I get to you guys, I had this plan, but it recently broke out of its downtrend after finding support in its base of the 16 kind of $17 range area here. Now it's back above all major moving daily moving averages, and today it's kind of pulling right back into this 150% year to date Mark row and 2524 if it continues to hold this, that'd be very constructive in the short term, we could see a continued move up to at least the $30 $31 range area that would coincide with the $20 billion market cap which is a round number can kind of see kind of always hesitated here on those levels as you kind of move up. But, you know, I also wouldn't be surprised if you kind of just see a little snap back down here this 200 Day and 50 day moving average, take a lot of people out before it goes higher, so I'd be nibble with it but I mean I think over, you know, the longer term, even as the first half of 2021 I don't think $40 is not is not out the cards, easily can go right back to $40 by the first half of next year.
Green hydrogen and fuel cell technology company, Plug Power Inc. (NASDAQ:PLUG) is another one that we like. It's kind of riding this eight week moving average funding support there. It's at 100% year over year level, it's got this little wedge breakout for technicians, short interest is almost 10% and a half percent right now, and it's kind of, at its summer highs, if it rolls over again it easily could create a nice little buying opportunity for everybody. We use a volatility scorecard that tells us how options are outperforming like straddle plays, that's actually in the 100 percentile so that means it's always outperforming the expected volatility, and then options are pretty cheap too. They're in the ninth percentile, and our open interest ratio is also in the 99th percentile so there's a lot more puts out there than calls. Another interesting thing is this $25 level is kind of a massive peak foot level, that should be supported going forward. So I would probably target a move in the short term of 33 3040, which is the $20 billion market cap level, where you can probably see some hesitation, but it definitely has the ability to go much higher than that.
And then finally, an additional company that I threw in here last minute as a bonus, something that we're kind of looking at, it's extremely speculative, from the standpoint, from a traders perspective right now. But QuantumScape Corporation (NYSE:QS) is finding kind of support level where it gapped up and ran to when the SPAC announcement. What company it was. And it's kind of just, you know, kind of delving consolidating there now for what three months, I would look for a signal for a move above that 20 week moving average that I put out here that will kind of give you the go ahead to buy this, I think it's getting it's got a Schaeffer’s Volatility Scorecard of 86 Oddly enough right here we're adding like a very specific pivot point. That plus 50% year over year level and a minus 50% year to date level. These are areas stocks like to kind of stall hesitate, find port find resistance, short interest is near its all time highs at 8.9% and options, you know, for an options trader if it did break out options are fairly cheaply priced. It's not the most cheapest option in general but in its range its price in the 13th percentile. And you can easily see a move I think back to the 40 range area.
So that's it for me. You know, thank you for your time, feel free to come over to www.schaeffersresearch.com and check us out we always got good material being put out there regarding options industry, give us a follow on Twitter at @schaeffers and @mtimpane we are always willing to engage and we're always trying to put great content out there for everyone.