When the S&P 500 said it would include Tesla (NASDAQ:TSLA) on the index last week, the stock rose by 20% on the week. The news also sent a chain reaction for the electric vehicle, battery, and lithium mining sector.
Given the euphoria of fuel cell and hydrogen power stocks like Plug Power (NASDAQ:PLUG) and FuelCell Energy (NASDAQ:FCEL), Tesla looks like the better trade. As ETFs and mutual funds systematically add to the Tesla position, traders may hold the stock, too. The buying pressure will lift the stock further.
Traders should then Tesla before the inclusion on Dec. 21.
Last week, after FCEL, rose 94%, Blink Charging (NASDAQ:BLNK) by 134%, and Workhorse (NASDAQ:WKHS) by 34%, the Tesla gain already looks modest. Similarly, Nio (NYSE:NIO) is on a firm uptrend while XPeng (NYSE:XPEV) broke out on Nov. 1. Traders should hold those stocks until the trend reverses.
Risks
Indirectly, the Chinese government’s cancellation of Alibaba’s AliPay listing puts XPEV and NIO stock at risk. Any extra restrictions against China-based firms would hurt the stock price. Fundamentally, strong delivery numbers from both firms suggest that the revenue growth for Chinese EV companies are in the early innings. For now, investors have no reason to sell either stock or Tesla until sentiment turns negative for a sustained period of weeks.
