Plug Power

2022年11月1日

This is a 2-month chart (each candle represents a 2-month period) of Plug Power (PLUG). For those who are not already familiar, PLUG is an alternative energy company that develops and manufactures hydrogen fuel cell systems.

I recently added PLUG to my portfolio as a long-term investment. In my opinion, it has one of the best long-term charts of any stock right now in terms of the potential for outsized gains in the future. I will explain my reasoning below.

Chart Analysis
The 2-month chart below shows the entire price history of PLUG.



Throughout much of its history, PLUG was resisted by the EMA ribbon (yellow and red lines). The EMA ribbon is a collection of exponential moving averages that act as resistance when price reaches it from below and support when price reaches it from above.

If we zoom in (see below), we can see that the EMA has tightened together and PLUG's price is now sitting right on the ribbon. When moving averages tighten like this, they can act as fairly strong support when the price falls to the moving averages from above.



Each time PLUG's price has fallen below these moving averages buyers have stepped in, thus causing lower wicks to form. This suggests the market is validating the support of these moving averages.



We can see in the chart below that the moving averages held as support even as the Stochastic RSI oscillated down. This is bullish.



Indeed, PLUG is forming a bull flag pattern on the log-scale, higher-timeframe chart. A bull flag of this nature can signal a potentially lucrative investment opportunity.



For those who read my post on using the money supply to gauge whether an asset is wealth-building, you would know that before entering a long-term investment position in PLUG one should first analyze the asset's chart relative to the money supply. (I've linked to this post in the related ideas below)



In the above chart, we see the performance of PLUG relative to the money supply (M2SL). This chart tells us that throughout much of its history, PLUG was a wealth-losing investment asset since the stock's price moved down over time relative to the money supply. The EMA ribbon largely acted as resistance.



However, the chart above shows that the moving averages are tightening together and that PLUG's price is consolidating within these tightening moving averages. This is a quite bullish sign. If a breakout occurs, an investment in PLUG could prove to be quite lucrative.


In the chart below, I apply Fibonacci levels to the length of the pole that forms the bull flag. We can see a perfect Fibonacci retracement is occurring, as price is finding support at the 0.618 level on the log-adjusted chart.



If the bull flag breaks out and a full Fibonacci spiral occurs, PLUG's price can move dramatically higher in the months and years to come.



In the below chart, I construct the Fibonacci levels using the all-time peak to all-time low. I drew projection arrows to show two plausible growth possibilities.



On a more complex, mathematical analysis, PLUG appears to be priming itself to "jump S-curves".



For a more in-depth analysis on what "jumping S-curves" means, you can read my post on the topic linked below. In short, I explain that price action can be graphically represented as a logistic function. Jumping an S-curve occurs when an inflection point is reached whereafter price begins to explode higher at a nearly exponential rate.

When the price of a company's stock jumps S-curves, there is usually some major impetus with regard to its earnings or profitability that occurs. For PLUG, that impetus could be hydrogen finally becoming a cost-effective form of energy. Hydrogen power is poised to benefit from multiple tailwinds in the years ahead: (1) Higher energy costs are driving capital into the development of alternative energy forms; (2) The transition to sustainable energy will drive investment capital into alternative forms of energy, including hydrogen fuel cells; (3) As hydrogen fuel cells gain massive adoption hydrogen power will become more cost-competitive.

My strategy with PLUG is to accumulate shares in my brokerage and retirement accounts up to a certain defined percentage. I can only ever lose 100% of that defined percentage of my portfolio if I am wrong, but if my analysis is right, the gains may reach as much as 8,000% over the course of years. I know most people on here trade on much shorter timeframes than years, but my opinion is that the greatest wealth-building occurs by staying invested over the long term.

Below are some interesting comparable charts. PLUG's current chart looks similar to Monster's chart in 2000 and AMD's chart in 2018.






What's remarkable about these charts is how little of an effect even recessions had on the stocks' price movements. In the case of Monster, its price remained generally flat, despite the S&P 500 experiencing major declines during the early 2000s recession. In the case of AMD, one of the worst stock market crashes in history (March 2020) is barely apparent on its chart. This lends hope that even if the U.S. or global economy experiences a recession in the years ahead and the S&P 500 declines, perhaps stocks like PLUG will be less affected.

To learn more about hydrogen energy including its advantages and disadvantages, you can check out this video from Bloomberg Quicktake:
youtube.com/watch?v=JGe8R0N20ps



As always, trade at your own risk. Anything can happen and my analysis can prove completely wrong. Feel free to leave constructive thoughts in the comments below. Thank you.

2022年12月28日

評論

As an update, the current price drop does not change my thesis. I still find this long-term investment idea to be valid, and I fully anticipated that this drop would occur.

The last time PLUG underwent a major log-scale Fibonacci retracement, it retraced to the 0.5 level on its log-scale chart, but no quarterly candle closed below this level. (See chart below)



The current price has simply retraced back down to the previous major impulse high (which occurred in 2014). This is natural and expected.



I was recently asked: At what point would this log-scale bull flag analysis be invalidated? In my opinion, if PLUG's price closes a quarterly candle decisively below 0.5 retracement level, I can no longer consider this stock to be presenting a log-scale bull flag.



Actually, I consider the coming market volatility of 2023 to be a great time to be accumulating PLUG. One does not get wealthy by buying risk assets on extreme strength when the market has zero concerns about the future. That is usually when a market top occurs. Instead, things will always feel highly uncertain, fearful, and doubtful at the time when you actually should be buying. A wise investor knows to remain data-driven despite market weakness. If careful technical and statistical analysis is providing objective data that one should be buying, then one should not avoid doing so merely because other market participants are fearful. (This is not a solicitation to buy, please do your own risk management analysis. Also, understand that this is not a trade idea, it is a long-term investment idea for those who plan to hold a small percentage of their portfolio in PLUG for years.)

Finally, anything can happen and I can be totally wrong in my analysis of PLUG. As an investor, if one of my many investments fails then I would forego a small percentage of my total portfolio. With investing, diversification is how one must manage risk. With diversification, it does not matter if a small position goes to zero because the gains on other investments will more than make up for that loss.

Unlike trading, which always requires the use of stop losses, investing should not involve selling until the drawdown phase (e.g. retirement or estate distributions). By not selling investments (the same strategy as Warren Buffet who has a hold period of “forever”), an investor can only ever lose 100% of a single investment's value. Whereas the most an investor can gain on a single investment is limitless. Therefore, you can be wrong most of the time in picking investments and experience more than half of your investments going to zero, and yet still be profitable because those investments that do well compound their gains, limitlessly.

The two main ingredients that you need to become wealthy are: (1) Convert your fiat currency into assets that grow in value faster than the rate at which the central bank increases the money supply; and (2) Hold such assets for as much time as possible.

Best of luck with your trades as we head into the new year! 🥳🎉