Nikola Corporation (NKLA) shares fell more than 10% during Wednesday's session after the company discontinued its collaboration with Republic Services, Inc. (RSG) on refuse truck development.

Key Takeaways

  • Nikola shares fell more than 10% after the company ended its collaboration with Republic Services to build zero-emission refuse trucks.
  • Wedbush Securities analysts believe that Nikola could face a tough challenge in regaining investor confidence in the new year.
  • The stock broke down from its reaction lows to fresh lows, but it could see some near-term consolidation.

Both companies determined that the combination of various new technologies and design concepts would result in longer-than-expected development time and unexpected costs. As a result, the program is being terminated along with the previously announced vehicle order.

Nikola remains committed to its battery-electric and fuel-cell commercial truck program, with plans to begin deliveries of its Nikola Tre battery-electric semi-trucks and break ground on its first commercial hydrogen station next year. Wedbush Securities analyst Dan Ives said that the company faces a Kilimanjaro-like uphill climb to regain credibility on Wall Street in the new year following the Republic Services news, maintaining an Underperform rating on Nikola stock.

Chart showing the share price performance of Nikola Corporation (NKLA)
TradingView.com

From a technical standpoint, the stock moved toward the bottom of its price channel following Wednesday's move. The relative strength index (RSI) moved toward oversold levels with a reading of 35.01, while the moving average convergence divergence (MACD) continues to trend lower. These indicators suggest that the stock could see some consolidation over the coming sessions, but the overall trend remains bearish.

A price channel appears on a chart when a security's price becomes bounded between two parallel lines. Depending on the direction of the trend, the channel may be termed horizontal, ascending, or descending.

Traders should watch for consolidation within the stock's price channel with a high of $28.00 after breaking down from prior lows of $16.15. If the stock reverses trend, traders should watch for a move toward trendline resistance at $28.00 or prior highs of $37.95, although the more likely scenario is an ongoing move lower toward prior lows of around $13.00.

The Bottom Line

Nikola shares fell more than 10% after the company discontinued its collaboration with Republic Services on refuse truck development. The stock is approaching oversold conditions and could see some consolidation before continuing its trend lower.

The author holds no position in the stock(s) mentioned except through passively managed index funds.