2 Longs, 1 Short in Energy Stocks: FSLR, EXC and CVX
Earth Day came and went, but hopefully not without leaving a positive impression on individuals and their day-to-day actions. But if you want to make a constructive impact on your investment portfolio, two buys and one short in the following energy stocks should be on your trading radar right now.
Ironically, and many will say perversely enough, the price of oil — that non-renewable and dirty fossil fuels — spiked to fresh five-month highs to kick off the trading week on Earth Day, a celebration of sustainability for our planet.
Who says the market doesn’t have a sense of humor?
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Still, while black gold is enjoying sunnier conditions, the trend toward using cleaner alternatives within the energy industry shouldn’t be overlooked. This includes being informed of the price charts of energy stocks Chevron (NYSE:CVX), First Solar (NASDAQ:FSLR) and Exelon (NYSE:EXC). Here’s how to capitalize on this necessary industry revolution with two longs and one short.
Chevron (CVX)
CVX, the first on this list of energy stocks, is the largest, dirtiest and most unsustainable outfit of the three industry players. And it’s also my short play within the group.
As the monthly chart of CVX stock reveals, Wall Street remains enthusiastic about Chevron. Shares have been trending higher since 2003 and are only a handful of percentage points have been removed from last month’s narrow miss of taking out January 2018’s all-time-high.
But just as trends like how we go about sourcing our electricity change, so do price charts for energy stocks like Chevron. And I think today’s long-standing uptrend is bound to unravel … and it could start with something as simple as CVX stock’s developing double top pattern.
With earnings on tap later this week on Friday, my recommendation is to short CVX beneath this month’s low of $119. This entry would put shares back below the March candlestick as key lateral support becomes resistance and April puts the finishing touches on an engulfing bearish formation.
First Solar (FSLR)
First Solar is the country’s largest player in the solar energy industry. And if the price chart has any say in those matters, FSLR stock is about to become larger.
Since cratering to an all-time-low in 2012, shares of First Solar have, while volatile, been moving higher over time. The price action in this energy stock has taken on a bullish inverse head and shoulders pattern.
A neckline breakout and pattern confirmation of a much larger move still have some distance to go before FSLR stock is in position for that sort of technical challenge. But I’m bullish on this energy stock today.
Shares of First Solar have been consolidating laterally for the several sessions while using the 50% retracement level for technical support. My recommendation is to buy FSLR stock above the pattern high of $61.23 in anticipation of a quick move toward the larger formation’s neckline.
With a potential earnings catalyst around the corner and FSLR stock known for its volatile reactions, I’d also suggest buying any pre-earnings breakouts in conjunction with a collar strategy to guard against uncontrolled and potentially much larger-than-expected portfolio risk.
Exelon (EXC)
You may not have heard of Exelon, but ignorance is not bliss. EXC stock is a controversial alternative within the trend of more sustainable and cleaner energy alternatives. Despite not being a household name, Exelon is the country’s largest operator of nuclear plants in the U.S with a portfolio of 23 reactors under its care.
Nuclear energy, of course, doesn’t emit greenhouse gases. That’s really good news. But in its most widely used form to generate electricity there are real issues like safely housing radioactive waste, dealing with possible harmful meltdowns, weapons proliferation and high operating costs. Still, don’t let that stop you from buying EXC stock today.
While we wait on Microsoft (NASDAQ:MSFT) founder Bill Gates’ TerraPower or other startups such as Terrestrial Energy and Oklo to solve nuclear energy’s shortcomings, for now, EXC stock is the $46 billion elephant in the room. And it’s not one to shut the doors on. And Wall Street appears to agree.
The monthly chart of EXC stock shows that following a steep and prolonged bear market from 2009 through 2013, shares have been moving higher and increasingly, within a steadier uptrend as investors open their eyes and wallets toward this energy stock.
Now, with shares of Exelon safely above the 62% retracement level, it looks like “all systems go” for this nuclear play. My recommendation would be to buy EXC’s current pullback, which barely shows up on the monthly view. As a safety measure, and to avoid any potential meltdowns, using an initial stop-loss of 7% also makes good sense.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
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