Greentech continues to sit on the bearish side of things, but it’s holding the bottom of the trading range the sector has been in since May 15. Our benchmark index is below the three moving averages we watch (20-, 40- and 200-day) and they are trending downward. The chart pattern formed by the weekly charts suggests we’re nearing the breakout (up or down) of a descending triangle formed over the course of the past year, which is more bearish than bullish. There appears to be little conviction from bears, based on selling volumes, however. Primarily, we’re looking to run out the string of 2021 this week, after which tax-loss harvesting will be over and investors will begin looking ahead. Among the potential catalysts: the Build Back Better plan apparently isn’t left for dead and the sector has consolidated on the long-term charts, which augurs a strong base for the next bull leg.
Sub-sector wise, water and utility stocks are bullish, with wind and solar bearish. In next week’s issue, we’ll likely feature two infrastructure stocks – one in water, one in a niche of renewable energy transportation, and perhaps a low-risk SPAC trade as well. We’re concluding our evaluation of candidates over the next few days.
2021 Review
How did we do this year? SX Greentech Advisor launched on May 5, and from then until now we have opened and closed 20 trades. Our total return: break even. On the trades, we booked two-tenths of one percent loss across both our Real Money and Excelsior portfolios. Include interest from Treasury bills where unused Real Money Portfolio cash is held and it’s a wash – we could do the math, but it’s academic. Our goal is to make money. Our benchmark, the Wilderhill Clean Energy Index, lost 14.7% in that time frame.
So we handily beat the benchmark, but we didn’t make money. Is there good news in that? Looking under the hood of our technical analysis-driven approach, it tells us the strategy is sound – operating in a trading range the whole period, we could have done worse, though we also could have done better (by switching to a range strategy, involving more trades and quick triggers). We had more bad luck in stop-loss timing than good luck (probably). But that can be found in any approach and usually is offset by some better luck down the line.
We had eight winning trades and 12 losing trades (excluding our currently open trades). That’s the 40% win rate a sound momentum-based strategy normally has, because losers are booked more quickly. However, in periods prior to the launch of this letter with Cabot, we had more winners than losers, which we credited to our fundamental screens applied on top of technical analysis. Taking stock of the full year – including the period prior to our letter joining Cabot – the strategy did very well, having been fully invested in the bull period that peaked in February, and having been stopped out into mostly cash starting in March as the sector retraced nearly 50% to the May low.
Real Money Portfolio
Aptiv (APTV)
APTV looks fine, holding its 200-day moving average on no news. A few technicals suggest shares could be ready to break higher here, but do have notable resistance right at these levels. Our stop-loss is ‘near 151’ (on a closing basis). HOLD
Archaea Energy (LFG)
Archaea filed restated financial statements for its SPAC period this week based on some accounting errors in 2020. It shouldn’t have any effect on the business now since it reflects the management of the SPAC prior to merging with Archaea. Shares are holding their 200-day line at 16.90. Resistance sits here at 18-19. Our sell-stop is ‘under 16.’ HOLD
Enphase Energy (ENPH)
Enphase broke our sell-stop levels and we recommended selling with last week’s update. The portfolio booked the sale at 188.94, a loss of 17%. ENPH is at 182 today and is likely to test support at 175. SOLD
ESS Tech (GWH)
The company and its largest shareholder, SB Energy, each will sell 5 million shares, according to a filing this morning with the SEC. That has shares down to 12.50 today, as it represents 7% of shares outstanding. ESS will use the money for expansion plans, while SB Energy says the sale will lower its ownership below 20% of the business and better reflect the 19.9% cap on voting power it already is subject to. Our sell-stop is ‘near 11’ and we’re removing the condition of a two-day close below the 200-day moving average we set last week, since that average has moved higher to 11.43. HOLD
Heritage-Crystal Clean (HCCI)
HCCI bounced off support at the 200-day moving average last week and is working against resistance from its 20-day average this week. There’s no news and a couple of resistance levels to break, meaning we’ll continue to Watch given sector conditions. WATCH
KraneShares China Green Energy (KGRN)
The ETF of China-exchange listed renewable stocks is back below its 200-day average today as it continues to be in a trading range. We’re looking for either a confluence of technical indicators that shares are starting higher again, a fundamental catalyst and/or an obvious value proposition to buy. China has tightened rules on foreign-listed Chinese companies this week, including adding a national security rule to further control how businesses operate. That may bode well for China-listed shares. WATCH
Onsemi (ON)
ON is a leader in the Greentech stock universe these days, with a very strong Relative Strength and an excellent chart. Shares are just off the all-time high around 70 hit earlier this week. Shares look like they may endure some short-term easing here. There is support in the 62-64 range. We’re up 45% on the position now. We have a sell-stop for half the position ’near 57’ and have one on the other half at ‘below 48.’ HOLD
Excelsior Portfolio
ADS-Tec Energy (ADSEW)
ADS-Tec Energy closed its SPAC merger last week. Our warrants are softer this week by about a nickel, at 1.35 today. Shares of the fast EV charger maker are lower too. Typically SPAC equities trade weaker after mergers, while warrants tend to perform better. HOLD
Li-Cycle (LICY.WS)
We recommended selling the Li-Cycle warrants in a special bulletin Monday after the company filed to redeem them by January 22. They will cash you out at just 10 cents a piece that day unless you sell or you tell the company to convert them to shares ahead of time. The portfolio booked its sale at 2.52, a gain of 10 cents, or 4%, on the trade. Li-Cycle is the first position of our summertime SPAC warrants basket to be closed. SOLD
Navitas Semiconductor (NVTSW)
We’ve held one-quarter of our Navitas warrants since selling three-quarters in mid-November at 6.68, booking 160% profit on that portion. Warrants have a maximum value of 6.50, since they are redeemable at 18 and exercisable at 11.50. They also can be called now with a clause allowing the semiconductor maker to do so when shares trade at 10.00. We recommend selling at 6.50, putting on a sell order with your broker. Warrants are at 5.24 today, up 105% from our buy price. SELL at 6.50 or higher
Origin Materials (ORGNW)
Warrants haven’t done much this week, trading around 1.40. Origin is planning to make carbon-negative plastics from biomass from a plant due to open in late 2022. HOLD
Ree Automotive (REEAW)
EV chassis maker Ree has perked up, with large buying in its shares and warrants last week. Toyota’s Hino Motors is working with Ree, while Hitachi and Ree this past week announced a plan to implement software-driven innovations to make EV manufacturing scalable and provide fleet management services. Warrants are up more than 33% on the newfound market interest, to 1.03 recently. HOLD
ReNew Energy Global (RNWWW)
Little news for the India renewable energy owner-operator. Warrants are weaker, at 1.55 today, from 1.75 last week. HOLD
Volta Inc (VLTA.WS)
Warrants slipped further this week, to 1.60 recently. There’s no news for the EV charger maker. 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, but we no longer recommend buying the warrants given the possibility that the clause can become effective with a couple of strong weeks. HOLD
Thank you for being a subscriber. Our next SX Greentech Advisor issue will be published Wednesday, January 4. Contact me anytime with questions or comments at brendan@cabot.net.