If you've been with me for a while, you'll know that I think "alternative energy" isn't alternative at all. It's just a question of time and capital before it's the biggest game in town.
One-hundred and twenty years ago, market-watchers might've said these wild new automobiles were an "alternative" transportation to horses, and while horses didn't go away overnight, we all know how that trend played out.
After some "irrational exuberance" during the first quarter of 2021 that saw sector ETFs like the SPDR S&P Kensho Clean Power ETF spike and decline from ridiculous highs, the clean-energy sector just kind of... hummed along, for lack of a better word, with not much in the way of action one way or another.
That's beginning to change again - for reasons I'll get into in a second. My screens have an awful lot of green on display.
Volume is starting to pick up, too, particularly in one cheap over-the-counter energy stock. It's benefiting from the same forces that are driving its big-exchange brethren, but not many people are looking at it.
Double-digit upside potential? With the added, oh-so-nice feeling that comes from being in on a great secret? I'll take it...
Move on This at Market Open Today
Crack open the paper - or turn on the news - and you'll see a ton of worry about the economic recovery that's been going all-out since the end of 2020.
You've got the aforementioned global supply chain chaos, the delta variant, the labor shortage. There's inflation. I mean, it's still warm outside, and pundits are already talking about Christmas being ruined, for cryin' out loud.
The thing is, these conditions are bullish for energy stocks of all kinds. Growth is on the menu. Businesses - ports, truckers, shipping, all of it - will have to hustle to keep the lights on, and that's a good thing for stocks, commodities, industrials, energy stocks, and more. There's no direct correlation between the price of oil and clean energy stocks, of course, but market forces usually mean rising commodities costs force bargain-hunters into clean energy.
Sheffield, United Kingdom-based ITM Power Plc. (OTC: ITMPF) is no exception. It's a fascinating operation, dealing mainly in the hydrogen fuel cell segment. Mainly, it makes polymer electrolyte membrane electrolyzers - chewing up water and spitting out hydrogen and oxygen. The hydrogen is used for fuel, sure, but it's also stored and sold to help other industries "de-carbonize" and achieve that all-important "net zero" carbon-neutral state. ITM figures prominently in the U.K.'s ambitious plan to de-carbonize the British economy by 2050.
Now, hydrogen has been uppermost on a lot of analysts' minds for the past week or so, all because of ITM's bigger, brawnier brother, Plug Power Inc. (NASDAQ: PLUG), another hydrogen superstar. The market is thinking about the massive profit potential in de-carbonization right now. Government contracts are one thing, but there's even more private-sector potential here. Big aerospace firms like Boeing Co. (NYSE: BA) and Airbus SE (OTC: EADSY) are looking to clean up aviation - a huge, even notorious greenhouse gas emission source - and they're looking to hydrogen to help make it happen. They'll have to partner with companies like Plug Power and friends to get that big job done, and those public-private and private partnerships will be worth tens of billions ultimately.
There's no question in my mind ITM will reap the benefits. What's good for the goose... is good for the other goose.
Unlike PLUG shares, though, ITM is downright cheap right now. You can pick up shares for well under $7 right now, and the technical setup on this suggests big profits ahead.
This stock is ticking all the boxes...
- Rising Volume: We're seeing the average daily volume rise as we get further away from the "quiet" trading that the markets saw in September.
- Technical Strength: ITMPF shares made a break above their 50-day moving average. This has been in a "neutral" trend for the last two months as the stock - and its peers - waited for volume to begin increasing as we head into a seasonally strong period for the clean energy trade.
- Potential Bullish Volatility: ITMPF shares are now pressing against their top volatility band as the stock rallies above its 50-day moving average. This pattern most represents the path that the stock took in early November 2020 as it launched from a price of $3.50 to an ultimate peak of $10. Given the nature of last year's rally, I don't expect to see an exact repeat, but the market is likely to push prices higher to our target.
Buy and hold ITM Power for the long term, up to a limit of $6.25. Add a 7% trailing stop to protect that principal and your profits.
Clean energy, artificial intelligence, electric vehicles (EVs), self-driving vehicles - these are the investing trends of the future, and the time to move for maximum profit potential is... right now.
Take electric vehicles, for instance - a market segment that's red-hot and, the way I see it, getting hotter. Shares of the biggest EV player will set you back more than $815 right now, but I know of a small company trading for right around $2 today. You read that right: an EV stock trading for two bucks. In fact, this stock has already been on an 1,140%-plus tear over the past year, only now it's looking to list on a major American exchange. If that goes through, this $2 company could potentially blast off - not $5 or $10 or even $15, but the potential is there for $20 a share over the next year. Take a look...
About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Penny Hawk. He also contributes to Money Morning as the Quant Analysis Specialist.