The unrealistic gain train keeps on churning as Kandi Technologies (NASDAQ: KNDI) 200% rise is only a day after Kodak’s 300% surge. Kandi is a Chinese Electric Vehicle (EV) maker. Thus it should not be surprising that after their U.S. expansion announcement, we see retail and intuitional investors flock to the stock. Especially as EV fever is injecting bullish optimism in Tesla, NIO, Workhorse, Hyllion, and Fisker. However, investors are wondering can the momentum continue, and when is the best time to get enter. Thus, today’s article will provide investors with an objective view on their U.S. announcement and whether YIG sees value in a KNDI investment.
Table of contents 1. KNDI soars off U.S. expansion announcement 2. Does YIG see KNDI as a viable investment?
Why is Kandi Technologies up 200%?
KNDI jumped 200%, 140% during Wednesday and 60% from pre-market today, after announcing they will launch two of their electric vehicles in the U.S. in August. Unlike most EV companies, Kandi is targeting small car lovers as their two US models, the K23 and K27, are compact, affordable and are intended for urban commuting. The K23 will cost $29,999 while the price of the K27 is 19,9999, demonstrating how KNDI is looking to accommodate the budget of the average joe. The announcement instantly created an optimistic future for Kandi’s 2021 revenue.
Hence, investors flooded Kandi Technologies as their future just became a lot brighter. However, investors should understand that FOMO played a significant role in jacking up the price. Because, investors who missed out on other EV stocks, like Nikola, do not want to miss out the next time an opportunity presents itself. Thus KNDI’s surge is a combination of a real catalyst combined with FOMO.
Does YIG see value in a Kandi Technologies investment?
Before I begin, I am obliged to remind our viewers that this is not financial advice but rather investment commentary from extensive research
Short answer: An investment in Kandi could potentially pay off but now is not the time to invest (opinion not advice)
Investing in KNDI for the short term
Considering the EV buying frenzy, some investors might be itching to buy KNDI at open. The current sentiment towards Kandi is bullish. Combine the stock’s underlying confidence with KNDI’s virtual viewing of the models on the 18th August and investors could see a short-term investment pay-off. However, YIG would like to point out that the EV industry is forming a bubble, as valuations soar through the roof. Realistically only a few EV makers will survive. Not to mention, the automotive industry is extremely competitive in the U.S. Especially as General Motors and Nissan have a similar car in the market the Chevrolet Bolt and Nissan Leaf. The cut-throat competition and high valuation could see the stock plummet in the near future. Thus, setting a modest and profit and stop loss, because the trade could go wrong is crucial for a successful short-term investment.
Shorting Kandi Technologies
Some investors may be adamant on a Kandi downfall because of the current valuation and ruthless U.S. competition and thus are looking to short. Investors can short Kandi by selling incredibly bodacious call options or by buying put options. Waiting until the longer-term picture becomes clear before shorting is crucial to mitigate any losses. Here is why.
Kandi’s implied volatility has increased because of the astronomical rise over the past few days. Meaning KNDI has the potential to swing significantly to the downside or the upside. Thus, selling KNDI call options exposes investors to the most risk. Because by selling, you simply wait, with the expectation that the option is worthless at expiration. However, the increase in implied volatility means the price could jump up by a ridiculous amount again. The buyer would then come knocking on your door, exercises their option, and you would suffer a nasty loss. YIG points out the perils of shorting KNDI not to discourage investors but to provide a balanced perspective simply.
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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Written by Patrick McLoughlin, Senior Manager of YIG.