NAKD LONG IDEA
Updated
Investorplace
Naked Brand has acquired U.S. electric vehicle startup Cenntro Automotive, giving the lingerie company access to the high-flying EV space. Naked Brand announced yesterday that it will swap 70% of its outstanding shares, plus $282 million in cash, for Cenntro Automotive, an electric vehicle developer that has, to date, sold nearly 4,000 commercial electric vehicles. Naked will swap every three existing NAKD shares for seven new shares to Cenntro shareholders. Together, Naked and Cenntro will have a market capitalization of approximately $2 billion.
My Thoughts:
With this news in mind my play on NAKD is exactly the same as in my previous analysis. I have been contacted MANY times regarding my stance on the long play for NAKD, and questioned if the news above will have any impact on my decision. It has not.
For those who are eager to know my thoughts on the recent price action, I have made a new smaller time frame chart for what I see about to happen over the coming days. There are two scenarios 1 + 2. The analysis may be a little challenging for those new to trading, but I will try my best to keep it simple!
Scenario 1 - NAKD recently made a local high ($0.93) on 9th November. This level was rejected, and brought us to these new lows. The point of focus is the bottom range I have highlighted ($0.60). This is the level we held that took us to the recent high of $0.93. By making a new low below this we have in theory invalidated the recent high. Therefore, we have set up the ability to now test the range we lost ($0.68), and by holding this make a new test of the local high again. This case is bullish and would be great for those who are long on NAKD. Making the new local low is how market makers grab liquidity and of course stop losses etc. You will see this play done millions of times in the stock market, and is a great indication that we could be setting up for higher.
Scenario 2 - As above, NAKD should in theory still test the range lost ($0.68), and a rejection of this would indicate a move to the downside, likely below the recent local low ($0.60). This case is more bearish and could mean we see a continuation of the drop in price. This doesn't mean I will be exiting, it will allow for many of us to accumulate more Longs on NAKD. The rejection could also cause us to hover in this range, and allow for market makers to accumulate shares. This is in term called a restriction range, where price is forced to stay in a particular price range.
Only time will tell where NAKD will go, but in terms of long term analysis of NAKD I still see the monthly and weekly holding well, and have been increasing my long position still. For those who follow news, the acquisition is very good for NAKD, as well as the move into the EV market. Once further news comes out on the merger and how shares will be handles, I certainly see this as much more than a long play now, and even and investment hold.
P.S The market overall has been dipping, with shorts taking profits and COVID related news in the works. This may or may not have an effect on NAKD, but I certainly can't see it stopping fundamental price action from happening as stated above.
Good luck and I will keep you notified if anything changes.
Naked Brand has acquired U.S. electric vehicle startup Cenntro Automotive, giving the lingerie company access to the high-flying EV space. Naked Brand announced yesterday that it will swap 70% of its outstanding shares, plus $282 million in cash, for Cenntro Automotive, an electric vehicle developer that has, to date, sold nearly 4,000 commercial electric vehicles. Naked will swap every three existing NAKD shares for seven new shares to Cenntro shareholders. Together, Naked and Cenntro will have a market capitalization of approximately $2 billion.
My Thoughts:
With this news in mind my play on NAKD is exactly the same as in my previous analysis. I have been contacted MANY times regarding my stance on the long play for NAKD, and questioned if the news above will have any impact on my decision. It has not.
For those who are eager to know my thoughts on the recent price action, I have made a new smaller time frame chart for what I see about to happen over the coming days. There are two scenarios 1 + 2. The analysis may be a little challenging for those new to trading, but I will try my best to keep it simple!
Scenario 1 - NAKD recently made a local high ($0.93) on 9th November. This level was rejected, and brought us to these new lows. The point of focus is the bottom range I have highlighted ($0.60). This is the level we held that took us to the recent high of $0.93. By making a new low below this we have in theory invalidated the recent high. Therefore, we have set up the ability to now test the range we lost ($0.68), and by holding this make a new test of the local high again. This case is bullish and would be great for those who are long on NAKD. Making the new local low is how market makers grab liquidity and of course stop losses etc. You will see this play done millions of times in the stock market, and is a great indication that we could be setting up for higher.
Scenario 2 - As above, NAKD should in theory still test the range lost ($0.68), and a rejection of this would indicate a move to the downside, likely below the recent local low ($0.60). This case is more bearish and could mean we see a continuation of the drop in price. This doesn't mean I will be exiting, it will allow for many of us to accumulate more Longs on NAKD. The rejection could also cause us to hover in this range, and allow for market makers to accumulate shares. This is in term called a restriction range, where price is forced to stay in a particular price range.
Only time will tell where NAKD will go, but in terms of long term analysis of NAKD I still see the monthly and weekly holding well, and have been increasing my long position still. For those who follow news, the acquisition is very good for NAKD, as well as the move into the EV market. Once further news comes out on the merger and how shares will be handles, I certainly see this as much more than a long play now, and even and investment hold.
P.S The market overall has been dipping, with shorts taking profits and COVID related news in the works. This may or may not have an effect on NAKD, but I certainly can't see it stopping fundamental price action from happening as stated above.
Good luck and I will keep you notified if anything changes.
Note
As we can see scenario 2 played out. We rejected the exact range i mentioned ($.068) and made a new local low. This therefore invalidated the previous test of the highs. In theory NAKD can now be ready to make an attempt at these new highs, trying to gain the levels we lost over the last few weeks. This must start with a new gain of the $0.60 range. By holding this level we should be good to continue higher. If we reject this level then I see us going much lower. It's important to note that we have just tested a weekly untested level at the $0.55 range. I have been filled on more longs in this range, whilst many have taken profits on shorts here. Hence, a strong 6% buy back at this level initially. I expect the whole market to continue to drop as monthly and weekly levels have not been tested on many, and a hold of this area for NAKD would look very strong in my eyes.
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