Since May, Greentech has traded in a 20-point range, between 70 and 90 in the benchmark we look to for sentiment, the Wilderhill Clean Energy Index. On Monday, we saw a break below support to 68, enough to cause concern we could be in store for an extended correction. We’ve bounced back a bit the past two days – moving toward 72 today – which opens the possibility we’re still range bound. However, buying volume isn’t great and we’re still below all the moving averages here. The broader market offers a little more hope, with the S&P 500 back over its major moving averages today. Right now, let’s stay defensive.
For Greentech the big blow was the apparent death of the Build Back Better plan, which would put the U.S. on track to reducing carbon emissions in half by the end of the decade – a modest, yet crucial step for the climate. On top of that is a change in California solar incentives hurt sentiment. Come January, rule changes will cut the price credit homeowners get for feeding power back into the grid and shift everyone over the long haul to a less robust incentive system. That’s the main focus at the moment, though the changes also would financially encourage adding battery storage and permit homes and business to install larger solar systems than currently permitted to account for eventual demand for EV and electric heating systems.
In our view, we also think simply that stocks got ahead of themselves in January and February this year, bidding up Greentech in anticipation the new administration would be able to quickly roll through extensive legislation to combat climate change. Much of the 10 months since has been trying to work through reset expectations given the reality of the razor-thin margin, major legislation has to pass.
Fundamentally, we’ve seen very good execution on earnings by Greentech businesses this year. In the longer run, that’s bringing valuations back toward the median of their long-term uptrend line.
Real Money Portfolio
Aptiv (APTV)
APTV bounced back over a test of the 200-day moving average which came close to our sell-stop of ‘near 151’ (on a closing basis). Buying interest looks positive the past couple of sessions and shares are over their 200-day of 155. The charts suggest APTV is in a price triangle, with a resistance line still intact from November’s high and a support line back to September also holding. Essentially shares could break out higher or lower as the lines converge – statistically, it’s about a toss-up. A lot will depend on sector and market sentiment around EVs. HOLD
Archaea Energy (LFG)
The landfill gas enterprise held support at its 200-day line very nicely, suggesting that Archaea may be finding its market legs faster than a lot of SPAC-derived companies do. In part that may be because management finished its effort to redeem all outstanding warrants last week. Little other news. Resistance sits here at 18-19 Our sell stop is ‘under 16.’ HOLD
Aspen Aerogels (ASPN)
We recommended selling ASPN with a special bulletin Tuesday morning, after it closed Monday below our stop-loss level and given broader sector and market conditions. The portfolio booked the sale at 50.12, the mid-point of the high-low for the day, given us a profit of 9% on the trade. Shares are right against resistance at 52-55, which they would need to break through to be bullish again. SOLD
Enphase Energy (ENPH)
A market data delay caused us to overlook that Enphase settled below our sell-stop on Monday. Last Thursday shares retreated back through a large gap support created in October. They have bounced off of the 200-day support line at 174, but have the momentum characteristics of a stock that is being rotated out of by institutional investors. At 190 right now, shares face possible resistance at 193, with the 20- and 40-day averages in the 200s. We’re going to recommend selling shares here given market conditions and the risk that a further breakdown from here may lead to much larger losses, with 120 a technical target to the downside. SELL
ESS Tech (GWH)
A San Diego utility is installing 3 Mwh of ESS’ iron flow batteries in a renewable microgrid project in the town of Cameron Corners slated to be operational next quarter.
Our sell-stop is ‘near 11,’ and we’re adding the clarification that we would execute on a two-day violation of the 200-day moving average, now at 11.37. Given market conditions and ESS’ youth in the market (making it riskier), we’re also shifting our rating from Buy to Hold. HOLD
Heritage-Crystal Clean (HCCI)
Our featured stock last issue looks to break a six-session losing streak today as it tests support at its 200-day moving average. Larger, more widely held competitor Clean Harbors (CLH) has fallen below its 200-day today, and volume the past two days in both suggest more weakness could be ahead. WATCH
KraneShares China Green Energy (KGRN)
Technical indicators focused on price action (stochastics) show the mostly China-listed Greentech stock fund is still in a downtrend, despite the rebound to 45 today from Monday’s low of 42. We want more than one confirming signal before buying in. WATCH
Onsemi (ON)
ON is holding up great, as semiconductors as a group remain in favor with the market. ON has excellent relative strength and continues to have numerous technical buy signals. We’re just a little off the all-time closing high of 65.45 here. Last week we said even as we’re up about 45% (as we remain), we can’t ignore market conditions. We set a sell stop for half the position ’near 57’ and have one on the other half at ‘below 48.’ No news this week. HOLD
Wolfspeed (WOLF)
We recommended selling Wolfspeed in a special bulletin on Friday, given WOLF settled below our stop loss level on the 16th. The portfolio booked the sale at 104.37, the mid-point of the high-low for the day and a loss of nearly 19%. Shares are a little stronger today, but are still in a near-term steep downtrend with less-than-convincing buying action coming in. SOLD
Excelsior Portfolio
European Sustainable Growth SPAC / ADS-Tec Energy (EUSGW)
The merger between the SPAC and the German maker of high-speed EV chargers was approved by shareholders yesterday. About 66% of shares were tendered for return of the IPO capital rather than participate in the new business, however, a higher level than expected. That likely removes about $95 million from the company’s balance sheet, as expected from the merger. There has yet to be confirmation from the companies that the merger will go ahead, but insider filings on conversion of rights into warrants have been filed this morning with the SEC, signaling the deal is probably done. Warrants are now underwater for us at 1.35 recently. Given the deal hasn’t been officially announced, we’re sifting our rating from Buy to Hold. HOLD
Li-Cycle (LICY.WS)
No news for the lithium recycler this week and warrants have eased of about 20 cents to the 2.45 area today, a little above break-even for us. Warrants are down a buck from last week, though. Li-Cycle has the option to initiate a cashless redemption if shares trade at $10 or greater for 20 of 30 days, which shares have. For that reason, we don’t recommend buying the warrants any longer. HOLD
Navitas Semiconductor (NVTSW)
Navitas announced its gallium nitride (GaN) semiconductors are now available for commercially for solar inverters and EV applications (as well as server farms). The press release included endorsements from Enphase and Brusa, which makes electrical components for use in automobiles. We sold three-quarters of the position in mid-November at 6.68, booking 160% profit on that portion. We’re holding onto the remainder to see if warrants can push back over 7. There are redemption clauses executable now by the company, so we no longer recommend buying the Navitas warrants. Warrants are at 4.96 recently, up 94% from our buy price. HOLD.
Origin Materials (ORGNW)
Volume is picking up in Origin warrants, which is a positive, even as we’re underwater from our purchase price of 2.43. Warrants are at 1.47 today, down about a dime from last week. Origin is building a plant to make carbon negative plastics from biomass. Origin doesn’t have a warrant redemption clause for when shares trading above 10 for a period of time, unlike our other holdings. Warrants are weaker this week, but not concerning. HOLD
Ree Automotive (REEAW)
Little change to the EV chassis-maker’s warrants this week. At a recent 71 cents, we’re down about 40 cents on the position. The underlying shares are range-bound in the 4 area. HOLD
ReNew Energy Global (RNWWW)
ReNew just commissioned new renewable energy assets that brings its current capacity up to 7.2GW and says it is on target to grow to more than 8GW the current fiscal year. Warrants are stronger this week by about 15 cents at a recent 1.80, putting us up 20% on the position. HOLD
Volta Inc (VLTA.WS)
Warrants are 50 cents weaker this week, at 2 recently, putting us about 10% in the red. There’s no negative news around the EV charger maker, so action appears to be in sympathy with disappointment over the lack of the Build Back Better plan to earn passage. Volta has the option to redeem warrants when shares trade at 10 or higher for 20 out of 30 days. That’s not executable right now with shares slipping to 7.60 of late. Still, we’re no longer recommend buying the warrants given the possibility that clause can become effective with a couple of strong weeks. HOLD.
Thank you for being a subscriber. Our next SX Greentech Advisor issue is published Wednesday, January 4. Our regular weekly update comes next Wednesday, December 29. Contact me anytime with questions or comments at brendan@cabot.net.