An important rule for successful investing is having a reason to trade. I use the acronym “NTNT,” which stands for no trigger no trade. But it can also stand for no thesis is no trade. The important part is to avoid investing willy-nilly. Today I will use the “thesis” version of NTNT to discuss the upside opportunity in Clean Energy Fuels (NASDAQ:CLNE) stock.
Technically, there isn’t a physical trigger to chase in the chart in either direction. But we can draw on logic and combine it with a fundamental opportunity to justify some upside potential. The income statement is not very exciting, flat to down in the last four years. But that’s a base that management can use for building better days ahead. Only recently has the world overtly committed to environmental, social and corporate governance (ESG) investing, so it’s a new ballgame from hereon out.
The Mission Now Is to Use Clean Energy
Cleaner energy is the way we all want to go and CLNE is in the thick of it. The argument for it is for a healthier globe and energy independence. The company has great roots from its co-founder T. Boone Pickens who was a legend in the field.
Critics could point out that of late it struggles to find a floor while other green stocks are soaring. First Solar (NASDAQ:FSLR) rallied 20% in a week and more like it did the same. They would be wrong because they would simply need to expand their time horizon. CLNE is up twice as much as the S&P 500 this year. It is also up 360% in 12 months, which is over four times more than FSLR.
Nevertheless, I suggest that investors temper the enthusiasm a bit from here. The important part of the future prospects lies in the change in global mindset. We are now actively pursuing cleaner energy solutions. All major auto manufacturers have already committed to this. Newer ones like Nikola (NASDAQ:NKLA) and Hyliion (NYSE:HYLN) are also picking up the torch to move it forward. Just like telecommuting finally is now a real thing, cleaner energy is also the real goal. It is no longer just a talking point.
CLNE has been at this game since 1996. I am confident they will be able to take their fair share of the opportunity. Given my overall apprehension about the markets in general I would be patient. It would be smart to take positions in tranches, thereby leaving room to manage the risk.
CLNE Stock Will do Better Later
Technically, this is not an obvious base for CLNE stock. There is the promise of one but it is still developing. On June 9th it failed massively at $14 per share, so that sets the next breakout. But before this can happen, the bull must hold $9.40. Losing that line would be a disappointment and a significant loss of momentum.
The big breakouts happened last year after it was clear that President Joseph Biden would be the next U.S. president. Now they are teetering around the middle of the range. Unfortunately it is a very wide one, so we don’t have a surgical line for support. Moreover, the monthly chart (pictured) shows that CLNE stock has had big fights here since 2007. It had support until 2014 when it collapsed to almost extinction. For the last six months the bulls have tried to establish support and hold it.
CLNE stock has shed a lot of its froth since the February highs. That’s the riskiest part that just fell out leaving stronger investors holding it. I can buy shares with better confidence here. I can alternatively sell puts lower to be long with a buffer. Both trades are bullish but the second one does not need a rally to win. In fact, it can absorb a big correction and still not lose money. I prefer this since there isn’t a specific catalyst here, just a mere thesis.
Wait for the Trigger
However if the stock stabilizes, it will give us a trigger to get long. This brings us full circle to how I opened the article with NTNT. This time the “T” would stand for trigger. I would expect that one would present itself at $13 and $14.5. There isn’t a one-size-fits-all trading strategy and in this case I’m comfortable with all of them.
Being comfortable does not mean being 100% confident. The extrinsic risk from the altitude of the indices scares me. The Fed is ready to pull the plug on its stimulative efforts. This will cause a correction in the stock market. No stock can rally on its own, because they don’t trade in a vacuum. The collective movement of equities will drag all stocks with it up and down.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nicolas Chahine is the managing director of SellSpreads.com.