While the propulsion battle royal is currently between the internal combustion engines (ICE) and electric vehicles (EVs), other technologies are trying to elbow into the mix. Hydrogen is one of those, and that’s where FuelCell (NASDAQ:FCEL) comes in. It’s technology will help that industry, but I remain a skeptic overall. This doesn’t mean that I condone shorting FCEL stock. Also I am not judging as to which tech is better.
Although, I am leery as to whether investors should focus on a three-way battle now. It may be a two-horse race between ICE and EV in 2021.
Regardless, for now FCEL stock is an excellent trading vehicle. If I own it and have huge gains, I’d book them. Shorting it outright is a bad idea here — it’d be silly to argue with such irrational exuberance. The fans of it are strong. Case in point, look at the rally back from the Dec. 1 correction. It takes a ton of conviction to turn a 40% crash into a 100% rally.
If I’m not already long, I should admit that I missed this swing and wait for another dip. The reason for the recent debacle was the issuance of 14 million shares, but the buyers remain strong.
Beware of Blindly Chasing FCEL Stock
In general terms, I am not a fan of stocks that have a four-digit all-time-high value. To boot, this one is now barely above $10 per share. It recently started soaring, but it’s important to keep the enthusiasm in check.
FCEL stock may have too much love on Wall Street. ESG (environmental, social and governance) investing is an important contemporary topic, so it is in the right spot for that. In addition, President-elect Joe Biden promised funds for alternative fuels, and the stock rallied almost 300% off the elections.
I remain a skeptic because I don’t trust politicians to follow up with their promises.
To stay relevant on the big board, management reverse split FCEL stock 12 for 1 twice recently. In reality, this was a penny stock about a year ago. Suddenly it’s going to the moon, which makes me leery of jumping in with both feet. Chasing runaway stocks is not for everyone. Traders who know how to momentum trade can profit from the action. Buying it up here for a fundamental reason is not the obvious course of action.
There Are Better Entry Points for Traders and Investors Alike
Theoretical opinions aside, the charts have clues to help traders navigate the action. Short term, FuelCell stock has support near $11 per share. That’s the contentious zone from which it collapsed on Dec. 1. It makes sense that it plays a role in the action once again. However, for a slightly longer term and better base, investors should consider the $7.50 zone. When stocks rally this fast, they leave a lot of froth behind. This makes them vulnerable to fast corrections and without warning. The bulls are better off if they rest along the way to build better bases.
Valuation will matter, but for now it would be futile to spend time dissecting them. The profit and loss metrics are almost meaningless because investors are committing at the ground floor of this idea. Almost the entire stock price is made up of hopium of future prospects. These by definition are speculative bets so there need to be a few rules. I would not average down if price goes against my thesis. Having conviction is one thing but throwing good money after bad is reckless. When allocating risk to speculation it’s important to set an amount and stick to it.
ESG and the need for alternative fuels is not a fad, it’s a necessity. The trend has been very slow for decades but it is gaining momentum. The success of Tesla (NASDAQ:TSLA) is playing a big role by making EVs cool. This is the first time there is a real contender to ICE, so other techs like hydrogen dare try again. Big money sees the success of TSLA, so they are also more comfortable daring another bet.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Nicolas Chahine is the managing director of SellSpreads.com.
