We recently started a series called “Penny Stock of the Day”. These ideas are geared toward traders with an extremely high risk appetite.
Our Penny Stock of the Day is chosen by screening for stocks under $5 and then applying technical analysis on the shortlisted set of penny stocks showing unusual volume. When making these trades, please make sure to pay vigilant attention to pricing moves and have a strict stop loss in place to avoid significant losses.
Penny Stock of the Day: Clean Energy Fuels Corp. (NASDAQ: CLNE)
Today’s penny stock pick is the energy company, Clean Energy Fuels Corp. (NASDAQ: CLNE).
Clean Energy Fuels Corp. provides natural gas as alternative fuel for vehicle fleets and related fueling solutions in the United States and Canada. It supplies renewable natural gas (RNG), compressed natural gas (CNG), and liquefied natural gas (LNG) for medium and heavy-duty vehicles; and offers operation and maintenance services for public and private vehicle fleet customer stations.
The company also designs, builds, operates, and maintains vehicle fueling stations; and sells and services compressors and other equipment that are used in RNG production and fueling stations. In addition, it transports and sells CNG, RNG, and LNG through virtual natural gas pipelines and interconnects; sells U.S. federal, state, and local government credits, such as RNG as a vehicle fuel, including Renewable Identification Numbers and Low Carbon Fuel Standards credits; and obtains federal, state, and local credits, grants, and incentives.
Further, the company focuses on developing, owning, and operating dairy and other livestock waste RNG projects. It serves heavy-duty trucking, airports, refuse, public transit, industrial, and institutional energy users, as well as government fleets.
Website: https://www.cleanenergyfuels.com/
Latest 10-k report: https://investors.cleanenergyfuels.com/sec-filings/all-sec-filings/content/0001558370-24-002174/clne-20231231x10k.htm
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for CLNE in the last 3 months, the stock has an average price target of $10.67, which is nearly 238% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Hedge Funds Increased Holdings by 315.7K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company completed the construction of a third production train at its LNG plant in Boron, California. This expansion increased the plant’s production capacity by 50%, positioning the company to meet the rising demand for cleaner-burning LNG from industries striving to decarbonize, such as city transit systems and maritime shipping.
- Institutional investors hold a good portion of the company’s stock. With a 53% stake, institutions currently possess the maximum shares in the company.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Symmetrical Triangle Pattern: The daily chart shows that the stock is currently forming a symmetrical triangle pattern, which is marked as purple color lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend.
CLNE – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line is above the -DI line, and the ADX line is currently moving higher from below the +DI and -DI lines.
#3 Price above MAs: The stock is currently above its 50-day as well as 200-day SMA, indicating that the bulls currently have an upper hand.
#4 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#5 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a pink color dotted line. This is a possible bullish indication. The stock is currently above its 50-day SMA, indicating that the bulls have currently gained control.
CLNE – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for CLNE is above the price of $3.30.
Target Prices: Our first target is $4.50. If it closes above that level, the second target price is $5.50.
Stop Loss: To limit risk, place a stop loss at $2.60. Note that the stop loss is on a closing basis.
Our target potential upside is 36% to 67%.
For a risk of $0.70, our first target reward is $1.20, and the second target reward is $2.20. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x more potential upside than downside.
Potential Risks / Red Flags:
- The company has a history of net losses.
CLNE – Consolidated Statements of Operations
- The market for vehicle fuels is highly competitive.
- The company’s contracts with various government bodies accounted for 31%, 27%, and 30% of its revenue in 2021, 2022, and 2023, respectively. This poses risks, as long-term government contracts and related orders are subject to cancellation if adequate appropriations for subsequent performance periods are not made. Such contracts could also be modified, curtailed, or terminated without prior notice. The company would only get payment for work completed and commitments made at or prior to the time of termination.
- As of December 31, 2023, the company had a total consolidated indebtedness of $264.8 million.
- Despite being a loss-making company, the executives are being paid significant compensation.
CLNE – Executive Compensation
As you can see, today’s featured penny stock offers big upside potential… but it also comes with a number of risks and red flags. As always, when dealing with penny stocks, we advise caution before entering into such high-risk ventures. Remember to think before you trade… understand the risks… and if you decide to trade, stick to your stop-losses!
Happy Trading!
Trades of the Day Research Team
READ BEFORE TRADING PENNY STOCKS: The allure of penny stocks lies in their potential to deliver massive gains in a short period of time. However, in exchange for that opportunity, most penny stocks carry tremendous risk. They can be extremely volatile and are susceptible to “pump and dump” schemes and fraud.
Unlike regular stocks, the financial condition of most penny stock companies can be extremely difficult to analyze, as the majority of such stocks are traded on over-the-counter (OTC) exchanges, which are typically less transparent and less regulated than the major exchanges. In fact, in the penny stock space, it’s often easier to spot warning signs and red flags than it is to identify a sound investment. Nevertheless, we do our best to identify short-term trade opportunities in this exciting space because we know some of our readers are looking for high-risk, high-reward ideas. We just urge you to make sure you fully understand the risks before making any of these trades.
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