Whether you’re a believer of financial statements or an advocate of price charts, a GAAP versus gap situation in Plug Power (NASDAQ:PLUG) has challenged investors. And today, another decision to disconnect from PLUG stock is looking ugly. Let me explain.
Nio (NYSE:NIO). Arrival (NASDAQ:ARVL). ChargePoint Holdings (NYSE:CHPT). Ballard Power (NASDAQ:BLDP). Not that it’s alone in its misery, but the past month has been a tough one for hydrogen specialist PLUG.
Already under pressure as part of a broader and hard-hitting rotation out of higher multiple growth stocks which began in February and continued to unravel in March, shares of Plug Power are off roughly an additional 17% in April.
It gets worse too.
A more precise examination of the damage reveals at its recent lows PLUG has given up a full 60% of the stock’s 2,883% rally off last March’s pandemic-induced bottom to recent all-time-high of $75.49 set on Jan. 26.
To be fair, there have been worse looking stock performance. But company-specific concerns which investors have been fearful over are looking increasingly more damning in the near-term.
Points of Worry
So, what’s behind the alarm bells in Plug Power? One spot of worry could be the Biden administration’s $2 trillion infrastructure plan working its way through Congress.
The plan’s passage is seen as largely benefiting clean energy initiatives. And without question hydrogen fuel cell technology like PLUG’s fit into the conversation of where funds might be allocated. But competition from solar, wind, hydro and geothermal have greater acceptance and favorable momentum. And bottom line, right now, Wall Street is worried those green alternatives could take the bulk of the prize monies.
PLUG has other problems or concerns hanging over its investors, too. A month ago this week Plug management announced the company would be restating some previously published financial data. One snippet from the press release kinda, sorta sums it up:
“The accounting related to the restatement is complex and technical and involves significant judgments in how to apply U.S. GAAP, given the innovative nature of the company’s business and its leading position in a new and rapidly developing industry. The revised accounting will change how the company accounts for certain transactions and items, but is not expected to impact the company’s cash position, business operations, or economics of commercial arrangements.”
What’s that mean? I’m not an accountant. The good news, and in layman’s terms, it doesn’t appear PLUG is to be following the path of more mischievous deceit or facing larger question marks which have plagued peers Nikola (NASDAQ:NKLA), Kandi Technologies (NASDAQ:KNDI) and Hyliion Holdings (NYSE:HYLN).
The bad news? One or more changes to GAAP and one meaningful price gap on the price chart remain unanswered and unchallenged, respectively.
PLUG Stock Weekly Price Chart
Source: Charts by TradingView
Good reports over the last couple weeks for PLUG stock have been largely dismissed. Word of Plug forming a $1.2 billion clean hydrogen infrastructure fund or being greenlit to apply for a loan guarantee under the U.S. Energy Policy Act of 2005 only allowed shares to turn green for a day or so, before resuming their plunging-like action described above. As they say, “it is what it is.” And this week is off to a continued poor start.
Technically, PLUG stock is narrowly breaching an inside doji bottoming pattern. The pair of candlesticks formed in the aftermath of Plug’s “GAAP” news and bearish gap reaction from investors. With today’s price action also failing the 62% support level, the next logical area of support is roughly from $20 to $24 which holds the 76% Fibonacci retracement level and initial trendline support off PLUG’s March bottom.
Time to Wait
The good news, if any, are minor breaches like today’s can act as a towel-tossing bottom in their own right. And with PLUG’s stochastics deeply oversold and on the cusp of a bullish crossover, there’s reason to monitor for that type of situation to emerge.
More importantly, without catching a falling knife and potentially exposing capital to undue and significant downside risk, any future buy decisions should wait for weekly pattern confirmation that’s well-removed from today’s more bearish reality.
On the date of publication Chris Tyler and / or accounts under management hold a long position in Nio (NYSE:NIO) stock and its derivatives, but no other securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.