An important rule for a successful investment is to have a reason to trade. I use the acronym “NTNT”, which means no trigger no change. But it can also mean no thesis is not a business. The important thing is to avoid investing willy-nilly. Today I will use the “thesis” version of NTNT to discuss the advisability of Clean energy fuels (NASDAQ:CLNE) Stock.
Technically, there is no physical trigger to hunt in the chart back and forth. But we can leverage the logic and combine it with a fundamental opportunity to justify upside potential. The income statement is not very exciting, flat to low over the past four years. But it is a foundation that management can use to build for better days ahead. It’s only recently that the world has openly engaged in environmental, social and corporate governance (ESG) investments, so it’s a new ball game from here on out.
The mission now is to use clean energy
Cleaner energy is the road we all want to take and CLNE is on the thick of it. The argument for a healthier globe and energy independence. The company has great roots from its co-founder T. Boone Pickens who was a legend in the field.
Critics might point out that in recent times it has struggled to find a bottom as other green stocks soar. First solar (NASDAQ:FSLR) increased by 20% in a week and more as if it had done the same. They would be wrong because they would simply need to expand their time horizon. The CLNE is increasing twice as much as the S&P 500 this year. It is also up 360% in 12 months, more than four times more than FSLR.
Nonetheless, I suggest investors temper the enthusiasm a bit from here. The important part of the prospects for the future lies in the change of world mentality. We are now actively seeking cleaner energy solutions. All the major car manufacturers have already committed to this. Most recent like Nicolas (NASDAQ:NKLA) and Hyliion (NYSE:HYLN) also take up the torch to move it forward. Just as telecommuting is finally a reality, cleaner energy is also the real goal. It is no longer just a topic of discussion.
CLNE has been playing this game since 1996. I have no doubts that they will seize their fair share of the opportunity. Given my overall apprehension on the markets in general, I would be patient. It would be wise to take positions in tranches, thus leaving room for risk management.
CLNE stock will do better later
Technically, this is not an obvious basis for CLNE stock. There is the promise of one but it is still developing. On June 9, it failed massively at $ 14 per share, which defines the next breakout. But before that happens, the bull must be holding $ 9.40. Losing that line would be a disappointment and a significant loss of momentum.
The big breakouts happened last year after it was clear that President Joseph Biden would be the next US president. Now they are wobbling towards the middle of the range. Unfortunately it is very wide so we do not have a surgical line for support. Additionally, the monthly chart (pictured) shows that the CLNE stock has had some big fights here since 2007. It was supported until 2014 when it collapsed to extinction. Over the past six months, the bulls have tried to establish and maintain support.
CLNE stock has lost much of its foam since the February highs. It’s the riskiest part that just fell, leaving stronger investors to hold onto it. I can buy stocks with better confidence here. I can alternatively sell lower puts to be long with a buffer. Both trades are bullish but the second doesn’t need a rally to win. In fact, he can absorb a big correction and still not lose money. I prefer this because there is no specific catalyst here, just a simple thesis.
Wait for the trigger
However, if the stock stabilizes it will give us a trigger to go long. This brings us full circle on how I opened the article with NTNT. This time the “T” would mean trigger. I would expect one to come in at $ 13 and $ 14.5. There is no single trading strategy and in this case I am comfortable with all of them.
Being comfortable doesn’t mean being 100% confident. The extrinsic risk linked to the altitude of the indices scares me. The Fed is ready to end its stimulus efforts. This will lead to a correction in the stock market. No stock can bounce back on its own, because it doesn’t trade in a vacuum. The collective movement of stocks will cause all stocks with it up and down.
At the date of publication, Nicolas Chahine did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.
Nicolas Chahine is the Managing Director of SellSpreads.com.