PreMarket Prep Stock Of The Day: Nikola

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

There is no doubt that the hottest sector in 2020 has been the electric vehicle one. Lead by Tesla Inc. TSLA, a host of other companies have had their up and downs. One that has been more down than up is Nikola NKLA, which is the PreMarket Prep Stock Of The Day.

The Company: Nikola is a designer and manufacturer of battery-electric and hydrogen-electric vehicles, electric vehicle drivetrains, vehicle components, energy storage systems, and hydrogen fueling station infrastructure.

Wild Ride In 2020: After ending 2019 at $10.32, the issue caught a bid that didn't come to an end until it peaked in June at $93.99. In July, it cratered to $29 and ended the month just off that low at $30.

Aided by a possible partnership with General Motors GM in September, it rallied to $54.56 and headed lower once again. The decline was instigated by a few different factors.

The partnership with GM was never finalized, its embattled founder and CEO Trevor Milton had to resign and the company was submarined by a negative report from a short-seller firm.

The triple whammy weighed on the issue and didn't find a bottom until Sept. 24 at $16.15. That low came in between its May 8 ($15.55) and May 9 ($17.61) lows.

On The Rebound: An attempted rally was snuffed out in October at $27.40 and although it didn't make a new low for the move (the October low was $17.86), it ended the month at its lowest level since May at $18.31.

This month it found buyers in the same area as it did in October when it bottomed on Nov. 10 at $17.59 and began to grind higher. A majority of its gains came on Wednesday when it rallied from $22.03 to $25.42 on much-heavier than average volume. The momentum has continued in Thursday’s session as it higher by $1.08 at $26.60 as of 12:30 p.m. ET.

Potential Catalyst For The Rally: On Wednesday, traders circulated a release on GM's website discussing its partnership with Nikola. It read, 'We signed an agreement with Nikola to engineer and manufacture the Nikola Badger using our Ultium battery system.”

Brent Slava, the head of the Benzinga Newsdesk, immediately contacted the company for confirmation. The GM spokesman told Benzinga the information on the investor relations site that has been there since Sept. 8, stating GM "still In discussions with Nikola."

Slava joined the PMP crew to discuss the interaction with GM and discussed the implications of the news.

Slava posed the question, if this was old news, why didn’t the short sellers reload after the rally? Dick said "they are afraid of the Robinhood crowd. Quantitative analysis does not matter anymore... if a story gets hot they can drive price anywhere.”

The full discussion from today’s show on the subject can be found here.

Moving Forward: After a higher open, the issue reversed course, but found support just above Wednesday’s close ($25.42) and resumed its move higher. As of 12:30 p.m. ET, it has taken the issue beyond Wednesday’s high ($26.73), reaching $27.73 and backed off.

It should be noted last month’s high was in that area as well at $27.30, making that area ($27.30 to $27.73) a major hurdle for the issue to clear for the rally to continue.