Polestar (PSNY) stock continues to edge high despite heavy resistance above $10


PSNY stock added another 1.5% on Wednesday that continued the current trend of small gains in the face of heavy resistance above $10. In fact, Polestar (PSNY) has now advanced in six of the last eight sessions after bouncing off the $8.64 level for the second time on July 1. The month has been grand so far for shareholders as PSNY has advanced more than 17% from its lows thus far. However, these are not the salad days just yet – the chart offers quite a few things to worry an investor.

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PSNY Stock Price: Return of the doji

PSNY stock has been riding steadily higher most of the month but has definitely hit major resistance once it reached the $10 range. On Friday, July 8 and then again on the following Monday, July 11, PSNY reached daily highs at or just above $10.34. On both days sellers rushed in to push the price down. Polestar's share price closed at $10.09 on that Friday and then $9.95 on that Monday.

Tuesday, July 12, then saw a pure doji. The opening and closing prices were both at $9.97, with a high of $10.15 and a low of $9.80. Wednesday saw PSNY touch a pinnacle at $10.70, but then shares sold off for the rest of the afternoon and even closed below the opening price. There is clearly a lot of bullish energy on most morning for Polestar, but sellers seem to come in most afternoons to have the final say.

Polestar history

Polestar originated in the 1990s as Flash/Polestar Racing in Sweden and at that time just modified existing Volvos into performance racing vehicles. Volvo appeared to like what Polestar was doing and acquired it in 2015 after making Polestar Volvo's official partner back in 2009

Volvo itself was purchased during the Great Financial Crisis by Geely Automotive, a major vehicle manufacturer in China. This gives Polestar international credibility despite only building 30,000 vehicles in 2021. Buyers know that both Volvo and Geely stand behind the newer brand and can lend their hand with technical and manufacturing experience. CEO Thomas Ingenlath manages Polestar.

Polestar has its headquarters in Gothenburg, Sweden and its manufacturing in China, although soon it may begin production in South Carolina at one of Volvo's facilities.

Polestar raised billions of dollars by agreeing to merge with Gores Guggenheim (GGPI), a special purpose acquisition company (SPAC), in late 2021. The final vote went through only in late June, and the ticker changed from GGPI to PSNY on June 24. The merger gives Polestar at least $1.25 billion in cash to ramp up manufacturing and slaps PSNY stock with an enterprise value of $20 billion.

The GGPI SPAC was itself a partnership between The Gores Group, a private equity company run by 1980s computer entrepreneur Alec Gores, and investment bank Guggenheim Partners.

Polestar sales, delivery figures are climbing fast

On Tuesday, Polestar released a statement boasting about its impressive growth in the first half of 2022. As we said, Polestar delivered just 30,000 vehicles in 2021. Tuesday the company said it had already had delivered 21,200 in the first half of the year and would reach 50,000 units for the full year. That would amount to 66% YoY growth. Polestar delivered just 9,510 units in the first half of last year.

“It is great to see that the number of enthusiastic Polestar 2 customers is growing so quickly,” says Polestar CEO Thomas Ingenlath. “I am very confident that the strong momentum we have seen this year in brand awareness and sales figures will accelerate powerfully in the coming years as more ground-breaking cars are revealed.”

Ingenlath said the company already has received 50,000 orders since the start of the year, which amounts to a 350% YoY jump. The company is adding a second shift to its production line in China to keep up with demand.

"Polestar expanded its global presence during the first six months of 2022 from 19 markets to 25, while the number of retail locations rose from 103 to 125 around the globe, with approximately 30 more expected to open by the end of 2022," reads the company statement. "This increased retail presence drove the number of test drives up by over 210%, a key indication of growing consumer interest in the brand."

Polestar competitors: Hyundai's Ioniq 6

The Superbowl earlier this year saw Polestar attempting to one-up EV leaders TSLA and Volkswagen. In a punch at Tesla CEO Elon Musk, the ad said Polestar was not trying to go to the moon. Another competitor, Hyundai, however, seems to be garnering a lot more of the praise lately.

Musk himself pointed out Hyundai's growing market share in the US earlier this year in a tweet. On Thursday, July 14, the South Korean automaker released the Ioniq 6, its first foray in the EV sedan space. Before now, Hyundai had been focused on making EV crossovers and SUVs. Hyundai plans to release 31 different EV models via its own brand and those of sister companies Genesis and Kia by 2030. Management said this will give it a 12% of the global EV market. In the January through May segment of the year, Hyundai already held 13.5% of the EV market compared to Tesla's 22% (exluding China), according to SNE Research.

The Ioniq 6 could be quite competitive with its $42,000 price tag. The sedan also has a driving range of 380 miles (610 Km), which is a 30% increase on Hyundai previous release. The Ioniq 6 will be available in South Korea later this year and in the US in early 2023.

Polestar models: Building a vehicle fleet

Polestar 1, a plug-in hybrid, was Polestar's first model in 2017.

Polestar 2, released in late 2019, became the company's first fully battery-electric model. The Polestar 2 is the primary unit in production currently. It starts at $40,900 MSRP after the US Federal tax credit is applied. The sporty sedan can travel 270 miles on one charge and has 476 horsepower.

Polestar 3, an SUV, will be launched by the EV automaker in October 2023. 

Polestar CEO Thomas Ingenlath says they strive to be an innovative company in the EV sector: “We didn’t start asking how we could be the disruptor; we asked how a modern car company could work beyond technical innovation. If what we are doing means disrupting the industry, then fair enough, but it was never our intention.”

Polestar is set to ramp up production to 300,000 units by 2025. It plans to achieve this 1,000% expansion strategy by using Volvo and Geely's manufacturing plants in South Carolina and China, respectively. Much of Polestar's design concept comes from mentoring from parent Volvo, and much of its production prowess comes from the much larger Geely Automotive shareholder. Polestar has also begun delivering EVs to Hertz (HTZ) as part of a deal for up to 65,000 rental cars.

Polestar 4 and Polestar 5 models are yet to be presented and little is known about them currently.

Polestar 3

Polestar stock forecast: $10.34 remains the obstacle

PSNY stock has been witnessing very long wicks on the topside this past week. This heavy pressure from bears typically leads to a downtrend or reversal. The whole range above $10 is quite resistant to PSNY bulls, but the $10.34 level has cut off bulls twice in two different weeks. A Close above $10.34 is needed to continue this rally.

Another sign that the rally is not strong enough to continue is that the Accumulation/Distribution line trending down. This means that accumulation is not taking place despite the increase in price. Without accumulation, a rally usually fades pretty quickly.

If PSNY were to drop back lower again, we think the $8.64 level is likely to hold once more, making a triple bottom. On the opposite side, a move above $10.34 would meet more resistance in the supply zone between 11.50 and $12.50.

PSNY 1-day stock chart

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