As a trader, I watch everything I can, but there are events or stocks I study carefully because they fly in the face of my sense of what is rational. The recent fuel-cell stock “event” and the stock PLUG are both worth my time to look at carefully.
- Investors, it seems have come to the realization that, after years of depending on government subsidy for survival and still losing money, these fuel cell companies have a chance of making their own way in the world. The depressed price of natural gas due to the shale boom is part of it, as is the increased understanding of the importance of a backup energy source in the event of a disaster, but neither of those fully explain the recent jump.
It is true. Neither of the above explains the absolutely irrational rise in prices in the fuel-cell arena. Somehow, these stocks caught fire, have stayed on fire, and, as of this morning, show no signs of cooling off; but they will. Of that I am certain.
Why am I certain these stocks will fall back? My experience watching fast-moving stocks tells me they will, but here is the rub – they might not, which suggests my experience means little. It would not be the first time I found myself on the wrong side of decision making in the world of trading.
Yet, the fact that I can make bad decisions about fast-moving stocks does little to help me understand the recent fuel-cell event, and it does even less to make me feel solid in my certain statement that they will fall back. If I honesty consider my sense of certainty, I have to say, the only basis upon which I conclude these runners will retreat is that I have seen this phenomenon before – stocks rise way, way higher than their valuation and then fall back to earth. In the case of PLUG, this valuation, at best, is about $1.80 and today it is pushing back above $11.
I might be right about these stocks I was trading until they went through the roof unexpectedly, and if I am, then I will buy and sell again, but as it stands now, when a stock trades one day some 215 million shares on the way to a price ten times its valuation and its average daily volume (10 days) is 28 million, something is amiss.
If I am wrong, it could just be the future is here now and the energy transformation I have been writing about is real and now tangible.
- The big move started a couple of weeks ago when Wal-Mart (WMT) announced that it would be placing an order with Plug Power for hydrogen powered battery units for their forklifts. The support of the king of logistics is of course significant, but so is the intention of existing users such as P&G (PG) to re-order. The corporate world has embraced the new technology, and history tells us that where WMT goes, others will likely follow.
Then again, maybe all this high-flying is simply about the massive amount of chatter about these stocks, which will mean when the talking stops, the selling begins. As always, we will see …
Trade in the day; Invest in your life …
