Nikola Stock Signals Massive Reversal But Will The Pattern Hold?

Nikola Corp NKLA gapped up over 5% higher on Thursday and spiked up an additional 9% before being pressured down toward Wednesday’s closing price by the general markets, with the S&P 500 plunging 3.75% lower by midday.

The surge was caused by Nikola printing better-than-expected first-quarter financial results. For the quarter, Nikola reported an earnings loss of 21 cents per share on revenues of a whopping $1.88 million, which beat the consensus estimate of a loss of 27 cents per share on revenues of $150,000.

The rise higher was the first indication the downtrend may be over for the heavily beaten down stock, which has declined about 92% from its June 9 all-time high of $93.99.

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The Nikola Chart: Nikola negated the current downtrend on Thursday by printing a high above the most recent lower high, which was formed on Tuesday at the $7.30 level. In order for an uptrend to be confirmed, Nikola will have to print a higher low above Wednesday’s low-of-day at $6.62.

• The higher low is likely to come as soon as Friday because Nikola was working to print a big shooting star candlestick intraday, which indicates lower prices are likely in the cards. For an indication that higher prices will come on Friday, Nikola would need to close the trading day back up toward its high-of-day near the $8 mark.
• When Nikola shot up, the stock attempted to regain support at the 50-day simple moving average but rejected the level, which also contributed to the intraday drop. Bullish traders will want Nikola to close the trading day above the eight-day exponential moving average now for more confidence moving forward.
• Nikola has resistance above at $8.17 and $10.52 and support below at $6.62 and $6.41.