Naked Brand Enters The EV Sector: What The Chart Says Is Next For The Stock

On Tuesday, Naked Brand Group Ltd NAKD, a lingerie and swimwear company, announced it will acquire the outstanding stock in three entities comprising commercial electric vehicle technology company, Cenntro Automotive Group. Upon closing of the acquisition, which the company expects by the end of 2021, Naked Brands will change its name to Cenntro Automotive Group but will retain its stock ticker symbol “NAKD.”

The company expects to grow its revenue from $25.3 million in 2022 to $506 million in 2023 through the sale of commercial EVs.

The news may not come as a surprise to traders and investors because on Sept. 29, Naked Brand’s chairman and CEO Justin Davis-Rice said the company was working toward a definitive agreement in the clean energy sector.

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The Naked Brand Chart: Naked Brand gapped up almost 30% higher on Tuesday morning and ran straight into a resistance level at 93 cents. The stock has attempted to break up through the key level on four separate occasions, since falling below the area on March 18 and failed.

For technical traders, Naked Brand looked set to trade higher regardless of news because on Nov. 3 the stock broke up bullishly from a falling channel that had been holding the stock down since Sept. 30. After breaking up from the channel, Naked Brand backtested the upper descending trendline of the pattern as support three times and held above it.

On Monday, Naked Brand bounced from the trendline and printed a bullish hammer candlestick, which indicated higher prices were likely to come on Tuesday. The price action also caused the stock to print a higher high in the uptrend Naked Brand has been trading in since Oct. 22.

Naked Brand now has a gap below between about 71 cents and 78 cents. Gaps on charts fill about 90% of the time so it is likely the stock will trade down to fill the range in the future.

Bullish traders who are not already in a position may also feel wary of Naked Brand’s relative strength index (RSI), which is sitting at an uncomfortable 70%. When a stock’s RSI reaches or exceeds the 70% area it becomes overbought, which can be a sell signal. When Naked Brand’s RSI reached the 73% mark on Sept. 28, the stock fell more than 30% over the course of the following three weeks.

• Bulls want to see sideways consolidation over the coming trading days and then for big bullish volume to come in and push Naked Brand up through the key resistance level near 93 cents. If the stock can regain the level as support, it has room to trade up toward $1.04.
• Bears want to see big bearish volume come in and drop Naked Brand down to fill the gap below. The stock has support at 72 cents and 62 cents.Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.

Photo: Courtesy Cenntro Automotive Group