Three Stocks: Plug Power, GameStop, and SunPower

Plug Power  

Shares of Plug Power (PLUG) traded higher today on news that the government was throwing the alternative energy company a lifeline.

The company has received a $1.66 billion conditional commitment loan guarantee from the Department of Energy for the company’s Green Hydrogen Deployment Pipeline project.

Plug Power has been in a cash-burn situation that has driven shares to a 95% decline from their 2021 highs. In January, the company announced the sale of $1 billion in common stock to finance operations as the company had burned through almost all its cash through 2023. Additionally, the company announced the finalization of the term sheet negotiations with the DoE for the $1.6 billion which was committed today.

Shares traded to their February highs this morning on news of the loan, making intuitive sense as these were the highs that the company trade to after the initial announcement of the “lifeline” negotiations.

Since then, the company has posted wider than expected losses and declines in revenue.

Since January, the analyst community has lowered or dropped their expectations for Plug Power, in one case citing that “While PLUG's long-term vision is commendable, it may not be entirely viable.”

From a technical standpoint, today’s significant move in the stock was immediately met with selling pressure on extremely high volume. This is normally the signature of 1) the short sellers getting squeezed out of a trade and 2) profit-taking measures from traders that had been waiting for an exaggerated move.

Plug Power’s next earnings report won’t hit the tape until August 9, meaning the stock will have little to trade on outside of its chart.

The chart suggests that we will see a continuation in the selling. Short-term support may lie at the $3.50 price based on a consolidation in the shares at that price in March, however, the $2.50 price continues to be the intermediate-term target for traders as the stock remains in a bearish technical pattern.

plug stock chart

GameStop

The dust is far from settling on the GameStop (GME) trade. Shares traded as high as $65 on Tuesday as the FOMO crowd continues to run into what might be a smoking theater.

MEME traders appear to be taking the lead from a continuous stream of movie clips from their leader Keith Gill as all the MEME stocks continued their pumps higher today. There’s a tone to the clips that say something without the owner of the feed saying anything.

Regardless, the MEME Army is taking the message to be “buy everything MEME related” as the typical names and several “short squeeze” stocks are surging higher.

Of note is a post on the “WallStreetBets” subreddit that points out that the last rising of the FOMO trade occurred at the top of the market in 2021. We’re not in that spot right now, but these stocks are likely to suffer the same fate they did in 2022. What is the definition of insanity?

CNBC reported this morning that the shorts lost nearly $1 billion on their short position in GameStop. Unfortunately, that’s a pittance to what they’ve made shorting the stock since the shares turned back to reflect the fundamentals and the outlook of the company.

GameStop’s earnings call is slated for Wednesday, June 5. Last quarter, the stock saw a 19% decrease in year-over-year revenue and provided an even worse outlook for the upcoming earnings report’s revenue. Odds are that the reality of the company’s upcoming report will weigh on the stock’s new lofty valuations.

From a technical perspective, watch for a move back below $30 to cue the market that reality is ready to start settling in with a relatively quick move to $20.

gme stock chart

SunPower

Let’s call today’s move in SunPower (SPWR) a short squeeze, because it is, but that’s where the story ends for the solar power company.

This morning the solar names took off as the Biden Administration announced new tariffs on some Chinese imports including solar panels. Many investors assume that the tariffs will help the longer-term outlook for SumPower, but that’s not necessarily true. In 2019, the company started to move away from the manufacturing of panels to focus on the sales and installation side of the business.  In 2021 the company spun-off its manufacturing to Singapore based Maxeon Solar.

That said, this morning’s headlines did trigger a short covering rally in SunPower stock. Its short interest ratio was a lofty 6.9 with short interest accounting for 95% of the company’s float. The float represents the number of shares available to trade in the market.

SunPower stock traded above the $5 mark today, a price that comes with heavy psychological value for traders. In February, we saw the stock attempt to close above this price, only to fall back into its intermediate-term bearish trend.

Today’s closing price moved the stock back below its bearish 200-day moving average, a sign that the stock is likely to regress back to its 50-day moving average at $2.50 as the short selling buzz leaves the stock in a price vacuum.

Target a return to $2.50 for shares of SunPower.

spwr stock chart

 

About the Author

Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.

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