One of the beautiful things about technical analysis is it quickly evaluates a stock. Without a lot of debate, you can quickly understand a trend. Is it up or down? Well, this morning, Ballard (BLP.TO) crossed into one of my scans again. What used to be one of the high rolling stocks 15 years ago, is actually rising up after being in a long-term meltdown. I'll leave it to you to decide if you want to investigate a micro-cap stock of $350 Million, but it has a lot of interesting qualities that made it worthy of an article this morning.
We can see the stock has popped up many times before, but rarely did it last more than a few weeks. This stock has also had more failed starts than any investor would like to endure. Fool me once, it happens; fool me again and again, my bad. So if the reputation of delivery by management is in question, this stock has all the hallmarks of hype and no follow through technically. I will say that they have partnered with some of the largest firms in the world. The technology has promise, but it seems hard to deliver.
First of all, the SCTR has stayed above the 75 level for 4 weeks. The straight line in the middle of the SCTR is when the price / volume was so low the stock did not have an SCTR. We can see in the chart a surge above the downward trend in 2013. The surge lasted for almost a year. The stock exceeded it's breakout level by 6x before it was done within 9 months! Common in hot trends, a parabolic blowoff ensued. Now we can see another 2-year downtrend that did not return to the long-term low. What makes the stock more interesting now is the consolidation (bull flag) after breaking above the trend line.
Lastly, I have only shown the last 10 years, but this used to be a $100 stock! Watching it wrestle around at the $3.00 level for most of the chart shown is really incredible. However, If you look at the MACD, you'll see the stock rarely has positive (above zero) momentum. The recent volume spike has follow-through volume and the MACD is rising. Other than the blow off top, the stock has not had a volume surge like it had in July 2016.
While I am never enamoured with buying a beaten-down name, this looks interesting as it is breaking out to new 52 week highs. The technology potential in fuel cells is big if Ballard can get them going more mainstream. I like a few things on this stock.
- It made a higher base than the previous base.
- The volume acceleration is worthy of interest
- The trend towards different fuel systems is on the rise but has been for a while, but nothing new today.
- The SCTR has surged above 75 and held.
- The stock is making new 52 week highs.
- It looks like a long term base with a neckline around $3.00. The 2009 low is the left shoulder, the 2012 low is the head, and the 2015 low is the right shoulder. The structure has 3 year spacing between 2009, 2012, and 2015. One would have to ignore the 1-month parabolic blowoff for a h/s structure.
- The stability of price around $1.50 - $2.00 suggests a trend change or behaviour change in the stock.
I recalled writing an article about Ballard Power during the blow-off move in 2014. It also included some discussion of Facebook and Tesla. Perhaps you'll find it as interesting as I did. Note that Tesla has not really done anything for investors since it announced the Gigafactory. Facebook, on the other hand, continues to rise. One is not making money, one is.
If you choose to invest in Ballard, keep to a small position, and you can think about gently increasing the position as the price action works in your favour. If it doesn't continue higher, read that old article and have another sip of coffee, again!
Good trading,
Greg Schnell, CMT, MFTA.
