Fuel cell power solutions provider FuelCell Energy, Inc. (NASDAQ: FCEL)
stock has exploded to the upside recently on the electric vehicle (EV) momentum
. Shares have spiked well over 300% from its February pre-COVID-19 highs handily outperforming the benchmark S&P 500 index (NYSEARCA: SPY)
. Money (and momentum) has spread into the heavily speculated EV stocks continued to flow into battery, materials
and battery charging
stocks. Seasoned traders (old timers) may remember FCEL trading with the likes of Plug Power (NASDAQ: PLUG)
and Ballard Power Systems (NASDAQ: BLDP)
during the first alternative energy boom, before the bust cycle. With the latter trading in the $20s, shares of FuelCell would appear to be a laggard under $10. Nimble traders can monitor the price action of the peers to gauge the sentiment while watching FCEL shares for opportunistic pullback price levels to trade reversions. It’s important to remember that narrative is fueling the momentum enabling these stocks to trade ahead of the actual fundamentals
. In other words, don’t buy into or believe the hype. These are still very much developmental companies selling the ‘dream’. Prudent investors should opt to wait for much deeper pullbacks to consider exposure, while nimble traders can ride the momentum bounces off pullbacks.
Q3 FY 2020 Earnings Release
On Sept. 10, 2020, FuelCell reported its fiscal third-quarter 2020 results for the quarter ending July 2020. The Company reported an adjusted earnings-per-share (EPS) loss of (-$0.07) versus consensus analyst estimates for EPS loss of (-$0.06), a (-$0.01) miss. Revenues rose 105% year-over-year (YOY) to $18.7 million beating analyst estimates for $16 million. Backlog decreased to $1.33 billion due to execution f backlog partially offset by increase in Advanced Technology backlog as a result of the joint development agreement with EMRE. On Sept. 30, 2020, FuelCell priced a 43.5 million secondary offering at $2.10.
JP Morning Upgrade and Downgrade
On Oct. 8, 2020, JP Morgan started coverage of FuelCell shares with an Overweight rating citing the Company as an “early stage but massive opportunity” in hydrogen-based energy storage solutions. For the record, the Company has been operating and burning cash since 1969 and almost went bankrupt in 2019 until the Exxon Mobil (NYSE: XOM)deal saved it. Major projects with Toyota and Exxon with the introduction of a solid oxide fuel cell geared towards hydrogen. As shares eventually more than doubled to mid-$5s by Nov. , JP Morning downgrades shares back to Neutral citing shares overshooting its prior estimate of fair value. They did not that the Company seems on track to reach profitability in 2022. JP Morgan prefers shares of Bloom Energy (NYSE: BE) in the fuel cell and hydrogen space. Nonetheless, shares of FCEL managed to skyrocket higher on the EV craze.
The Green Wave
Further fueling alternative energy plays is the potential for a carbon tax to be administered by the Biden administration to join the 46 countries and 28 subnational regions in combatting climate change. Hydrogen is a clear winner in emissions-cutting technology and as long as the “green” wave continues to gain momentum, FuelCell is a viable speculative play. The Biden administration has stated its intent to greatly minimize the fossil fuel industry seeking ways to cut greenhouse gases through the promotion of clean energy. These are all keywords that fall into FuelCell’s core narrative and product of SureSource power plants that utilize fuel cells to generate ultra-clean power.
FCEL Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provides a precise view of the landscape for FCEL stock. The weekly rifle chart went parabolic on the stairstep stochastic mini pups blasting it clear through the upper Bollinger Bands (BBs) and $7.33 Fibonacci (fib) level. The daily stochastic formed a market structure high (MSH) trigger below $7.05. The daily 5-period MA support overlaps the $7.99 fib. As warned earlier, this stock is only suitable for nimble and seasoned traders who can manage and react to price action. The opportunistic pullback levels sit at the $7.99 fib, $6.68 fib, $4.92 fib, $4.37 fib and $3.12 fib. The extend of the pullbacks may seem extensive but keep in mind that shares were trading as low as $0.19 a year ago when the Company was on the brink of bankruptcy. The final two lowest price levels are best suitable for prudent investors, while nimble traders can trade the reversions off the early fib levels.
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