The Trading Week Ahead: Bloom Energy (BE), Gold (GLD), Mid-Caps (IJH) & EUR/USD

There are not many times in August where I can actually say, “Wow, that was a solid trading week.”. But August 2018 has proven the exception, not the rule.

Regardless, there is much to discuss for the trading week ahead, so let’s get right to it.

Bloom Energy (BE) – highlighted back on August 8th…+16% as of now

Here is what we had to say then….

Good day traders.

This is a new issue so it is not possible to get a handle on this from a technical perspective, but Brad put together some solid talking points:

Bloom Energy (Ticker: BE)

Possible Upside:

  • This is an exciting new technological electricity product
  • Converts natural gas or biogas into electricity through an electrochemical process
  • Lower harmful emissions than conventional fossil fuel generation
  • 125 times more space-efficient than solar power generation
  • https://www.youtube.com/watch?v=T0TBwCVKzZQ
  • The company plans to be cash-flow profitable this year (https://www.marketwatch.com/story/wall-street-got-what-bloom-energy-is-about-ceo-says-after-ipo-2018-07-25)

Possible Risks:

  • There is a concern about the issuance of massive amounts of common stock reserved for equity-based compensation plans and convertible senior secured notes in the future
  • However, as we have seen with recent IPOs when they start strong they can run very strong within the first 30-45 days, after that the probabilities are strong price action decrease

Summary:

  • The market has been positive regarding forward thinking IPOs with strong new products. This is exactly what Bloom Energy is.
  • We could see significant price appreciation at the beginning of its public trading days

Update on IPO trading performance.

A few weeks ago we wrote a piece about trading IPOs. There are both opportunities and pitfalls when it comes to IPOs. How can you make a reasonable choice?

Volatile Early Days

Ticker IQ (Chinese company named iQiyi) was a recent recommendation and it soared in its debut. Volatility has also been a part of the trading (see above).

Since reaching a high of $46.23 on June 19, 2018, the stock has pulled back. As we referenced in this chart (focus on the day 73 forward), IPO stocks tend to sell off between 60-90 days of trading. This doesn’t always end the upside run. In fact some will stay strong for as long as 100 trading days. However, the 180-day lockup expiration date looms large over most IPO stocks. As the chart shows, the tendency is for most stocks to sell off and find their low around trading day 135 to 150. Be wary of entering new positions prior to this time frame.

Performance

A few of the names we have been tracking besides IQ are CBLK, ZUO, and recently BE. We like their business fundamentals as well as some of the recent price action.

We forecast there will be an opportunity to enter or add to IQ in the next couple of months as the stock puts in a low. (Recall from our previous articles that when a stock starts strong it usually goes on a pretty good run.) Look at what Zuora has done this year. Now it has sold off. It may have a bounce left in it before it sells off into lockup expiration. Also, Carbon Black started strong. Its recent performance has been weaker. It could see a partial recovery in the next few weeks and then resume its slide into lockup expiration. Dropbox posted good earnings numbers this week and had a strong move to the upside, only to surrender nearly all the gains in the next session. This is a testament to the weakness surrounding a stock headed into lockup expiration.

New on our radar this week is Bloom Energy (BE). We issued a note to clients last week.

Why do we like Bloom Energy? They have an innovative, clean, and space-efficient approach to producing electric energy for commercial and residential uses. Check it out.

Notice how the blue line in the chart, representing BE, has made a strong move right out of the gate. This is a stock we are keeping our eye on ……and you might want to, too.

Gold (GLD), S&P Mid-Caps (IJH) and EUR/USD

Click here to see my interview on TD Ameritrade on Friday August 24th for further details.

Have a question for me? Just ask.

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