Fuel cell products developer and manufacturer Ballard Power Systems (NASDAQ:BLDP) needs a win. Over the past year, BLDP stock has suffered a loss of 43%. On Tuesday, it tanked more than 4%. However, a recent company announcement coupled with rising interest in the underlying industry may bode well. It’s possible, then, that the dynamic could provide a swing-trade opportunity for bullish speculators.
Recently, Ballard made news when it inked a deal with Solaris Bus & Coach, a leading European bus manufacturer. According to the terms of the long-term agreement, Ballard will supply 1,000 hydrogen fuel cell engines to Solaris for the European transit bus market. Per TipRanks, the deal represents the largest in Ballard’s history. Upon the announcement, BLDP stock skyrocketed.
What’s also intriguing is the projection for the core market. From Fortune Business Insights, the global fuel cell market size reached a valuation of $4.58 billion in 2021. Experts believe that the sector could hit $36.41 billion by 2029. If so, that would imply a compound annual growth rate of 29.7% from 2022.
Given the push for clean energy solutions, BLDP stock at the very least enjoys a compelling narrative.
Resistance Barriers and Short Squeezes
As a broad overview, it’s not entirely unreasonable for investors to consider a longer-term approach to BLDP stock. However, the main issue is the entrenched resistance among the bears. There’s a reason why Wall Street analysts rate shares a consensus hold. At the same time, the expected per-share price spectrum is vast: We’re talking a low of $2.30 to a blistering high of $15.
Because of the steep variance, a shorter-term approach may be best. Barchart’s Trader’s Cheat Sheet reveals key resistance levels based on its calculations for standard deviation and what it terms pivot points. From Tuesday’s closing price of $3.13, long-side traders face resistance levels from $3.15 to $3.38.
That’s going to make for an uphill battle and we’re already seeing that pan out. During Tuesday’s afterhours session, the bears succeeded in driving down the price to $3.09 or 1.28% below the close hours earlier. Still, it’s also possible that should BLDP stock break through the trenches, it could fly dramatically higher.
I say that because of the short interest. While we’re not talking an extreme amount of negativity, the metrics are modestly elevated: 9.19% of the float is held short while the short interest ratio comes in at 4.51 days to cover.
Due to the volatility of BLDP stock – it features a 60-month beta of 1.66 – bearish traders likely know that if shares break higher, they’ll break in a big way. Therefore, they may look to cover earlier before circumstances get out of hand. If so, that may be lucrative for bullish gamblers.
Trade of the Day: Buy BLDP Stock Call Options
If you want to participate in this high-risk, high-reward idea, then the in-the-money 2024 Aug 16 $3 call may be your ideal play. On the April 2 session, this contract closed at a premium of 55 cents. The idea here is to take advantage of the significantly cheapened price from Tuesday’s volatility. That should give us extra margin to expand on the call option’s intrinsic value while hopefully also benefiting from time value.
Another factor that drove the spotlight to this call option is its bid-ask spread. Now, given that we’re dealing with a small-capitalization company that’s lesser known than some of its peers, the volume for BLDP stock derivatives is thin. Therefore, the spreads will be sizable, a risk factor that you must appreciate before diving in.
Still, the $3 August call comes in at 25.9%, which while steep is far better than many other calls across the strike price and expiration date spectrum. Looking ahead, a return to near the $4 level is the ultimate target. Beyond that, the bears may be tempted to chomp down.
On the date of publication, Josh Enomoto 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.
