Review of my Pro Shares trades
With US stock indexes pushing into new highs (and the FTSE advancing), this week’s blog is focused on a few individual shares that we are carrying in my Pro Shares service. Some have risen dramatically since tipping them and early signs from those in my recently issued EV Report are positive.
Remember, in my approach it is the chart patterns that first get my interest in a particular issue. Of course, I take on board the background information on the companies but do not usually study their internal financial information as most other analysts do. In today’s easy money world, I do not believe levels of debt are too significant especially in a tech company. But that will eventually change.
Tesla is a stand-out example – it lost buckets of cash for years before recently turning the corner (and much of its earnings are derived from carbon credits). Yet it is now making new ATHs.
Of course, when interest rates do move up significantly, company debt will very much be an issue. But that day is ahead. For many start-up tech companies, they will be earning profits and begin to pay down debt and the threat of default would recede.
So here are a few of our holdings. On each chart I show how I analysed them using my tramline, Fibonacci and sometimes Elliott wave inputs. I hope they are instructive.
TESLA This company is always in the news (as is Mr Musk, but not always for the right reasons) as the EV leader and has just advanced into new ATHs on the back of the huge Hertz order. The cars are highly desirable and while they are not exactly selling like hot cakes, they are making top rankings in the monthly sales data.
I tipped it as recently as August as it appeared to be breaking out of a superb triangle/wedge pattern in play from January. In the intervening months, I just waited and watched as much controversy surrounded Elon’s tweets as well as production delays. But when the shares moved up to the upper wedge line, and planted a kiss, I pounced
With huge momentum now behind anything in the EV sector (see my recent EV, Battery and Charge Report), the shares are climbing vertically – and that is the danger as momentum readings are in super-extreme territory which is unsustainable. Taking at least some profits here would be a prudent move.
Bought Tesla at $660 in August. Currently $1,196 (+81%)
NVIDIA This company is a leader in AI and video games chip making. It controversially bought our UK chip maker AIM. But I first spotted the great setup in July on a dip in a strong third wave. OK, I was late to the party, but the strong bull move was compelling and I could ignore it no longer.
Of course, with the shares flying as investors bank on AI to finally fulfil its earlier failed promise, the company is riding on the bull case. Taking some profits would also be a prudent move.
Bought NVIDIA at $183 in July. Currently $256 (+40%)
SNOWFLAKE This young US software company operates in the cloud computing sector that is running red hot, as evidenced by the latest Microsoft figures. But what caught my eye was the bullish chart set-up back in July
I have yet another convincing triangle/wedge pattern and a three down to a mom div.. The July break above pulled back for the traditional kiss and on some counts, we are in a major third wave up taking the shares into new ATHs above $430 on this leg.
Bought Snowflake at $267 in July. Currently $353 (+32%)
ENCAVIS This German company operates wind and solar farms and is thus right at the forefront of the ‘renewable’ energy sector in Europe. Whatever you think of the viability of ‘renewables’, they are being pushed heavily by Western governments who are determined to see them take over from fossil fuels. Companies in favour will be forced to succeed (or else!)
Encavis is cash hungry and they have been forced to go for rights issues and that has diluted existing shareholders. But it does pay a dividend and earnings are expected to grow by 20% pa or more, When I looked at the chart in July, I was struck by the potential as it appeared to be making a long solid base form which to launch a decent rally phase. In general. the longer the base formation, the stronger the rally out of it.
Ans when the shares pushed up above the pink resistance zone, I pounced.
Bought Encavis at 17.20 last month. Currently18.15 (+5%)
ITM POWER Another young company and this time in the very new hydrogen energy sector. and was one of the first into developing modern fuel cells for vehicles. The UK and other governments are keen to see a lot more development of this sector as they see it filling in for the intermittent wind and solar electricity generation.
The double kiss helped to validate my upper trendline (not a tramline since there are only two touch points). If the shares can keep well above the pink danger zone, can we expect a Scalded Cat Bounce up?
Bought ITM Power at 395 in June. Currently 490 (+24%)
SNAP Not to give the impression that all of my Pro Shares tips are winners, here is Snap, the social media platform that is more a news feed than for messaging. The shares were advancing from our entries in a strong bull run and made a high of $83 last month. But a terrible earnings figure last week sent them plunging and positions were exited.
Ouch! The shares have come back into a major support area that may or may not hold. But I am pleased to be out since the sharp correction has dented confidence in their business model. It may not return and I do not want to hold a share that has just taken a massive shale-up. I will observe how the chart plays out now.
Bought Snap at 62.90 in April. Out at 55
FUELCELL ENERGY This is another UK outfit in the budding hydrogen sector. It is developing ‘green’ hydrogen systems that is finding great favour in the rush to de-carbonize energy production. In the first burst of enthusiasm, the shares roared away to a high at £29.50 in February but then sanity prevailed as the difficulties in the energy transition were more widely appreciated. So for eight months, the shares drifted lower in a series of overlapping waves that appear corrective.
And last month, I noted the huge mom div and advised buying since I believed the downside was limited.
And a few days ago, the shares broke strongly above my upper tramline, pulled back in a ‘near miss kiss’ and appears to be on its way north.
Bought FuelCell Energy at 709 in October. Currently 799 (+12%)
I take a long term view for Pro Shares members. Some of the shares we have held for about a year. But I am a swing trader and always looking for a good opportunity to take at least some profits as targets are hit. I am not comfortable seeing a good gain turn into a mediocre one – great wins are just too hard to give up!
If you like my kind of trading, take a generous three week Free Trial to my Pro Shares service here
YELLLOW CAKE This is an unusual UK operation as it buys, stores and sells the yellow coloured uranium oxide powder that is processed by others into fuel rods used in nuclear power generators. Nuclear is making a strong come-back.
This is a very young outfit and has too little chart development for me to apply my usual tramline methods, but I liked the pull-back off the initial surge off the IPO and the move to new highs in March/April.
Bought Yellow Cake at 270 in April. Currently 350 (+30%)
Not all of the action is with the tech sector. We are also carrying positions in ‘low tech’ companies. Here are a few
LLOYDS This is always one of the most active shares on the board – and is extensively covered by many pundits. The Corona Crash last year sunk it to a low of 24p in September and I noted the huge mom div then. That is usually a prelude to a sharp recovery once upside targets are hit. And they were as it moved above my small trendline and that is when I pounced at the32p.
Recently, I bought the dip to the 43p level and the shares appear to be heading for the January 2020 gap which it is likely to fill around 55p. With mortgage rates now finally turning up, bank earnings will be boosted and maintain the upward price trend.
Bought Lloyds at 32p in November. Currently 50p (+56%). Also bought at 43p in September.
TULLOW OIL This small UK oil company was hit very hard in 2019/202 along with most other commodity operations. But as it wallowed along the bottom, I tracked the waves and decided that at 19p, the downside risk was small compared with the upside potential. Remember when the producers were begging – and even paying – users to take the stuff away from overflowing storage tanks in the USA?
Of course, when economies picked up, oil demand would return – and oil company shares would benefit. This was one of my Buy Low/Sell High picks. And the yawning gap is a magnet!
Bought Tullow at 19p in November. Currently 45p (+136%)