It’s been a volatile week so far, with Monday an excellent day for risk stocks and yesterday a tough day for tech as inflation fears circulated in the market – rising bond yields usually always hit tech stocks the hardest. Greentech often goes in tandem with tech stocks and they did yesterday and are today, as bond yields retreated overnight.
Stepping back, Greentech remains in a trading range, with recent action showing the least movement between highs and lows in 2.5 years. We’re not making new highs, instead making weaker highs as the 40-day moving average presents clear resistance right over the sector. We’re also making, so far, higher lows, which has been a positive. Technically, a move greater than 5% lower would be a break of support and an 8% drop would crack more important support. Similarly, a 5% move higher would break resistance for a while. In sum, we’re waiting for a catalyst one way or the other. There are green shoots, so to speak – action feels more predictable than it has since February. Our trimmed down portfolio is holding well with our most recent purchases, Centrus Energy and Aemetis, performing about as expected so far.
We’ve adjusted most of our sell-stops, below, to account for volatility and the possible need to take a longer timeframe to see our quality names through.
Real Money Portfolio
Aemetis (AMTX)
We bought Aemetis after our Special Bulletin on Friday, with the portfolio adding a full-sized stake at 14.64, the average of the high and low for the day. That puts us up 11% right now. This week has started off volatile, with Monday seeing shares surge into the high 17s and yesterday running down as low at 15.55. Our buy price is right at chart support, with the mid-19 area likely the next resistance. A Golden Cross, where the 50-day moving average crosses over the 200-day is set up to occur in the next couple of weeks, a generally bullish signal that should help sentiment. Setting a sell-stop is a trickier calculation, especially in the nervous market. It’s not unreasonable to decide to exit around the buy price here. But AMTX volatility tells us a normal move could be 3.6 points, so we’ll be using the 200-day moving average, at 11.91 now, as our sell-stop here and giving it a two-day leeway. That is, our sell-stop will be triggered after two consecutive closes beneath the 200-day, whatever price it’s at (barring extreme moves that tell us to get our sooner.) BUY under 15
Centrus Energy (LEU)
A volatile start to the week for the nuclear fuel refiner. But technically Tuesday’s drop didn’t cause a lot of damage, other than slightly higher volume and finishing at the bottom of the day’s range, both a little bearish. It’s clear the round price of 40 is resistance for shares, with support at 34, 31, 29 and 25. We haven’t set a sell-stop yet; we recommend near 28, where both chart (it’s the top of the prior trading range) and moving average support sits. A drop to that level means we may need to hold Centrus for a while to see our thesis pay off, but as the only refiner of HALEU fuel, which is almost certain to be the next fuel for the U.S. nuclear power industry, we’re willing to have patience. BUY
Chipotle Mexican Grill (CMG)
A surprising down day for Chipotle on Tuesday, which hacked through support at the 40-day moving average. Our sell-stop remains set at “around 1,825,” but given the nearness of that along with the lack of company-specific news (but for the positive reception of smoked brisket, a test offering nationally), we’re going to roll that back to our buy price, to give ourselves room here. The new sell stop is “around 1773” and we’re shifting our rating from Buy to Hold, given the break of initial support. HOLD
Onsemi (ON)
The semiconductor maker continues to look good, despite a high-volume, 4% down day Tuesday. We may see more backtracking here and 45 should provide good support, where multiple support signals meet. Our sell-stop is “below 39,” below the 200-day moving average. BUY
Trex (TREX)
Trex is also close to our sell-stop after a weak Tuesday that saw an open below initial support and a close at the bottom of the day’s range. That’s more bearish, and Trex would be hurt by economic turmoil that may be caused by the posturing in Washington over the debt ceiling. But volume was light. We’re willing to suffer a modest drawdown with Trex and settle in for a longer play here. We’re rolling back our sell-stop from “near 102” to “below 98,” which shows good support. In positive news for Trex’s raw material supply–polyethylene plastic waste–standup plastic pouches from Glenroy, a leading provider, can now be recycled. HOLD
Excelsior Portfolio
Our special opportunities portfolio right now consists of warrants in six companies that have gone public or are going public by SPAC. Our horizon here is longer term, as it needs to be with young SPACs. Our rating remains BUY on the six as a basket. We have no sell-stops.
Li-Cycle (LICY warrant)
A positive article in Barron’s on the stock has helped sentiment, though market volatility has brought warrants back to where they were last week, at 2.38. Little news this week from the lithium recycler.
Navitas Semiconductor / Live Oak II SPAC (LOKB warrant)
Brusa HyPower, an arm of a German company specializing in EV charging and drivetrain components, says it is “convinced that Gallium Nitride – or GaN – will enable us to further improve our products. The main advantages of Navitas GaN power ICs, are simplicity of driving high-speed switching performance, increased reliability and compact form factor,” in a release put out by Navitas last week. There’s not a lot of business detail, but Brusa is a long-established (since 1985) electrical engineering firm. Its HyPower division focuses on power components of renewable products, like solar panels. Market-wise, the warrants are improving in price while the stock treads water. We read that as a bullish sign, at least as SPAC trading has been developing. The SPAC has announced an October 12 meeting of shareholders to approve the merger with Navitas, a maker of next generation gallium nitride semiconductors. Shares will trade under the ticker NVTS when the deal is approved, and our warrants will trade as NVTSW.
Origin Materials (ORGN warrant)
Little news for the carbon-negative plastic producer, which plans to use natural products, mainly wood, instead of petroleum products to make plastic. Warrants are slightly better this week, at 1.61.
Ree Automotive (REE warrant)
Ree is slightly weaker this week; there’s little news. The EV sector generally faces a lot of investor headwinds and given Ree is gearing up for revenue, we’ll need a catalyst of some sort to move warrants/shares.
ReNew Power (RNW warrant)
Good strength in warrants this week, up about 20 cents to 1.83 recently. India’s largest renewable energy owner/operator is bidding for a government sponsored program to fund solar panel manufacturing. However, other domestic companies led by billionaire Mukesh Ambani’s Reliance are said by local media to be favored. In total, 17 companies are bidding for the multi-billion-dollar subsidies to build panels, all but one a domestic Indian firm. Two winners are expected.
Volta Charging (VLTA warrant)
Volta warrants are unchanged on the week at 2.60 midday Wednesday, but have moved around between 2.95 and 2.410. Little news, but sentiment appears to continue to be positive around the EV charging station firm.
Thank you for being a subscriber. Our next SX Greentech Advisor issue is published Wednesday October 6. Contact me anytime with questions or comments at brendan@cabot.net.