Workhorse Group slammed the brakes on its rally following news of a DOJ investigation into rival Lordstown Motors. But how does this affect WKHS stock?
Electric truck maker Workhorse Group (WKHS: NASDAQ) closed 9.40% lower on Friday. Although WKHS’s $14.17 closing price is still more than 100% higher than six weeks ago, the bulls will be more concerned with last week’s 20% plunge.
A WSJ report claiming the US Department of Justice (DoJ) is investigating irregularities at electric car start-up Lordstown Motors (RIDE: NASDAQ) triggered Friday’s sharp sell-off.
Now you may ask what this has to do with WKHS?
In 2019, Workhorse Group signed a licensing agreement with Lordstown. As part of the deal, Workhorse acquired a 10% equity stake in RIDE. Furthermore, as per the agreement, the stock was locked up for 2 years. Therefore, the current problems facing Lordstown is piling negative pressure on the Workhouse stock price.
The daily chart has turned 180 degrees from its previous bullish outlook. Last week’s price action pushed Workhouse Group below the 100, and 200-day moving averages ($15.20 and 416.07, respectively).
Furthermore, the price closed only marginally higher than the 50 DMA at $13.97. If the price finishes today’s session below $13.97, it will further reinforce the negative momentum of the stock.
Additionally, a strong horizontal support line at $18.59 remained resolute during the rally at the start of last week. This reinforces the significant resistance above the price.
Considering the latest development, the outlook has soured considerably, and WKHS stock will likely remain under pressure this week. An obvious target on the downside is the $7.07 low of May 13th.
This bearish view becomes invalid should the price close above the $18.59 resistance. With short interest running at 36.03%, shorting WKHS stock is a perilous endeavour regardless of fundamentals.
And on that basis, anyone brave enough to do so must proceed with caution.
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