Just last week I wrote about Tesla (TSLA) and how in my view it was about to break higher for a re-test of prior highs. 

My thesis was quite straight forward: the market seemed to have been bear-leaning on TSLA, expecting a breakdown lower on earnings, below the dreaded $600 level that it just can’t seem to push past. 

But corporate earnings turned out good (or not bad, at least) so the plan never came to fruition.

I argued that with no negative catalyst in sight, a hold higher would drive an up move and this is exactly what we’re seeing play out. 

Well, I’m now noting a similar pattern in a few other EV names and believe we could be in for a larger scale momentum influx into the sector. 

Let me show you exactly what I mean and give 3 names I’m looking to play it with:

EVs Never Gave Up

Here’s the other part of my TSLA thesis that I didn’t mention just yet: TSLA never gave back following what many consider an “irrational run-up.”

It’s generally considered that irrational up moves are quickly followed by down moves of similar magnitude. 

The logic here is simple: once structural market forces (like low share float or forced short covering) can’t keep the share price running any longer – the bubble has to deflate and shares will sell down to a justifiable valuation. 

If you look at most huge runners – that has usually been the case. You see a “pop-n-drop”. 

This is where EV names are very different…

We saw TSLA do a ~10x last year, NIO a ~20x, XPEV and LI – 5x and 3x respectively. 

And while they sure sold off over the last few months, there’re not anywhere close to levels where the run-up had begun – most are only 30-40% off the all-time highs. 

This is what I call relative strength and in EVs case – a very significant one.

The price action may very well be signalling there’s a lot more ahead… 

And I’m not arguing about valuations or long-term expectations here.

I’m only saying that right now, we’re having a sector that many consider very overheated… completely fail to deflate!

Couple that with a very strong market and high short interest in some of the names – this is not a beast I want to fight. 

I’d rather ride along with it, and here are 3 names I’m monitoring:

Tesla Inc – TSLA 

• Market Cap: 662B
• Short Interest: 4.03%
• Free Floating Shares: 802.29M
• ATR: 24.43

I had to start with Tesla as:

1. It’s been working to a tee 
2. TSLA is and has been the big boy – I expect it to lead the way

I’m maintaining everything I wrote last week, except that now there’s actually confirmation – $630-$650 held very well and advanced higher. 

I now want to see the $700 establish well – the stock needs to hold cleanly above it for a period of time. 

If that happens and we get no hard breakdowns, I remain bullish on TSLA and would seek to buy dips against $700 for a move to my original target of $850-$900.

LI Auto – LI

• Market Cap: 27.74B
• Short Interest: 25.43%
• Free Floating Shares: 95M
• ATR: 2.60

There are a couple of reasons to be excited about this name and I think you already figured the main one out – nearly 25% short interest on a relatively small share float. 

Just today the stock gapped higher on the latest delivery update: the company delivered 8,589 vehicles in July 2021, a growth of 11.4% month over month. 

There’re 2 things on the chart that get me really excited:

• The stock is in the $35 area, more or less above everything except for the outlier all-time high candle – meaning, most of the short traders are underwater
• Over the past 2 weeks, the name dipped significantly on “China worries” and rebounded very strongly. 

I think we can see continuous momentum in LI and may get long on dips against $30, for a move to $45 and possibly above. 

XPeng – XPEV

• Market Cap: 32.46B
• Short Interest: 5.39%
• Free Floating Shares: 378.15M
• ATR: 3.02

Last, but not least, I’m watching XPEV, for many of the reasons I stated:

• I like how it’s forming a new base above prior resistance at $35
• I really like the rebound from the “China worries”
• Updates are impressive as well with 8,040 vehicles delivered in July, representing 22% growth month over month

I want to see a hold above $40 for a move past the next inflection point at $45, and an eventual run-up into $60, shall the sector catch the momentum.