<p>Nasdaq is down more than 10% from its peaks as volatility continues to stifle the stock market. FuelCell Energy (NASDAQ: FCEL) has also not been able to escape the anger of the market, with the FCEL share down about 30% from its peaks just a few weeks ago.
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Surprisingly, the charts do not look bad. They actually look pretty good.
I do not remember the last time I looked at a stock that was down 33% from the peaks in such a short time and thought it looked appealing. That being said, while the charts are bullish, there are cautions.
First, this stock has an incredibly large trading range, with a 52-week range ranging from 13 cents to $ 5.88. Second, while it averages more than 10 million shares per day, it has a market capitalization of less than $ 500 million. For many, the wide range and low market price make it a no-touch, and I can not blame them.
For others, however, FCEL shares are a speculative game. Granted, this may not be the best time for a particular stock, but the charts are in focus right now. Let’s take a look.
Trading in FCEL shares
Above is a daily look at the FuelCell stock, while a weekly chart is below. They show similar settings, albeit in different time frames.
In the above, traders will notice resistance that comes between $ 2.80 and $ 3 per share. So far, every dip from this zone of resistance has been shallower than the last. Although not usually done with such a large interval, this is known as a rising triangle.
It is a bullish technical pattern where rising upward support (blue line) presses a bearing against a static resistance level (black line).
It helps that the 50-day moving average also comes into play near uptrend support, although the FCEL stock shows some signs of struggling to stay above this mark. In any case, if stocks remain above this level, it puts a step back above $ 2 on the table, and as bulls hope, it technically leaves a new test of $ 3 on the table.
In the end, the goal is to see resistance recede and the FuelCell stock triggers a breakout above the $ 3 mark. If support fails, however, it puts the 100-day moving average on the table, followed by the $ 1 mark.
The weekly chart shows a similar pattern. That is, a rising trend is offset by $ 3 resistance. If it does, it could trigger a move to $ 4, which would represent a double from current levels.
At present, the FCEL share continues to stay above the 10-week moving average. However, it is struggling to maintain its long-term uptrend. If it starts to break down from current levels, it could trigger a move lower, with the $ 1 to $ 1.25 range as the next support zone.
Where do I stand?
Technically, the charts do not match FuelCell shares. They are even sloping upwards and if the bulls fall out, large upwards can be in front. But we are not dealing with a normal environment here.
The index stumbles wildly, while the Volatility Index (VIX) remains quite high. It does not bode well for speculative positions. In a normal environment I would consider FCEL shares a risky game, but in this environment I consider it even more so.
When times are tough, investors should do one of three things (and preferably a combination of them):
Assess market conditions and take less risk. Rely on companies with the strongest companies – their moat and finances. Have above-average cash on hand to distribute in favorable situations.
Now FCEL shares can only be one of these possibilities. However, it falls on the risky side of potential investments and does not fall into the category of high-quality assets. The latter consists of companies such as Blue Chip Dividend Shares and cash-hoard giants such as Microsoft (NASDAQ: MSFT) or Alphabet (NASDAQ: GOOGL, NASDAQ: GOOG).
FuelCell is neither profitable nor free cash flow positive. It has $ 90 million in long-term debt, which is about 20% of its market value. Furthermore, while current assets and total assets amount to current liabilities and total liabilities, respectively, the overlap is not overwhelmingly convincing.
Here is the end result: If you are forced by a long position in FuelCell, keep an eye on the technology and use extreme discipline. If stocks break down, a remarkable downside may be on the way. For everyone else, FCEL shares are probably too risky to trade right now.
Bret Kenwell is the director and author of Future Blue Chips and can be found on Twitter @BretKenwell. As of this writing, Bret Kenwell is a long GOOGL.