Monday’s market tumble to two-month lows, which was the first gap lower that also pushed the broad market beneath its 40-day moving average since mid-summer, triggered a number of our sell-stops. As we noted in a special bulletin Monday evening, yesterday’s bounce back was expected, and welcome, as is the positive action so far today. Sentiment could change with Federal Reserve Chairman Jerome Powell expected to make a statement at 2:30 Eastern time this afternoon. Regardless, there are reasons to be cautious. Buying volume in the market was lighter than we would have liked to have seen yesterday, and market breadth indicators show that 69% of the S&P 500 components are now trading below their 50-day moving average. That suggests investors have more reasons to sell and fewer to buy. We exited four holdings yesterday based on Monday evening’s special bulletin and entered one, as detailed below. Booking losses is never pleasant, but a key part of successful long-term trading is to preserve capital to allow us to maximize winning trades. Rejecting established sell-stops on the fly turns a disciplined momentum strategy like ours into one much more arbitrary. That in turn generates much greater risk of clinging to bad trades as they become stomach-churning deep losses. Overall in Greentech, the sector is negatively biased, being below all its moving averages today. But there continue to be signs bears tired themselves out in early August when they failed to test the May nadir of the 2021 retracement. That means the sector’s turnaround remains underway. Real Money Portfolio Aemetis (AMTX) With Monday’s bulletin we recommended buying Aemetis if it dropped into a support zone. We continue to hold that recommendation and may adjust our outlook to buy in later this week if AMTX doesn’t give us a dip and if the minute-by-minute trading charts show good buying. Last week, the company completed the last payment to the local utility to hook up its facility to deliver renewable natural gas to the pipelines starting later this year. BUY between support at 10.60 and 12 Ameresco (AMRC) We sold AMRC based on its violation Monday of our sell-stop. We booked an 11.5% loss on the trade, selling at 63.06 Tuesday. Shares are well below their 40-day moving average, and have broken the near-term uptrend. The forecast is for further weakness in the near term, with a possible test of its 200-day moving average, which is six points below current prices. SOLD Aptiv (APTV) APTV we sold Tuesday based on breaking our sell-stop in Monday’s drop. We booked a 12.4% loss, selling at 144.04. Shares are below the 200-day moving average and have the look of having returned to the prior trading range with 135 at the bottom and 157 as the ceiling. SOLD Centrus Energy (LEU) With Monday’s special bulletin we recommended buying Centrus, having dipped into our previously recommended buy range from our latest SX Greentech Advisor issue, of September 15. The American uranium enricher has no exposure to China and any other financial exposure – through banks, etc.—is very tangential. The portfolio bought yesterday at 33.46, the midpoint of the high and low price for the day. We’re up 5% as of midday Wednesday on a nice rebound. BUY Chipotle Mexican Grill (CMG) We’re up about 9% on the organic food and ESG leader. Shares are in a tight range, consolidating after mid-July’s run-up. One of Chipotle’s successful innovations the past year has been in its loyalty app and starting tomorrow loyalty members will have exclusive access to ordering smoked brisket, a limited time offering at locations in North America. A small thing, but one that shows the customer loyalty program offers value to customers and should reflect itself in longer-term results. Our sell-stop remains set at around 1,825. BUY First Trust Water ETF (FIW) We exited FIW yesterday in adherence to our sell-stop being triggered at Monday’s close. We booked a 1.4% loss, selling at 87.07. Already with today’s trading, shares have spent the most time beneath their 40-day moving average than they have since September 2020, which suggests the rebound may not be quick right now. Progress on U.S. infrastructure spending likely will be the next catalyst upward. SOLD KraneShares China Clean Tech ETF (KGRN) We sold the China stock basket Tuesday, also as a result of Monday’s action triggering our sell-stop. The sale resulted in a 3.7% loss on the position. Shares are below their 200-day moving average, the technical indicator we pay the most mind to. KGRN did hold a clear level of support at 42 Monday, which suggests a rebound could come soon. We like the fund as the better option to buying individual Chinese stocks because of the central government’s tendency to whipsaw companies with bureaucratic pronouncements, but rarely do we suggest buying under the 200-day. SOLD Onsemi (ON) We’re up about 6% on the American semiconductor manufacturer. The company last week announced its inclusion as the brains in a new low-power asset tag – small, Bluetooth enabled trackers – that will have a five-year battery life, well more than existing tags. Developers Blyott and Tatwah are marketing the device to hospitals and medical facilities to track equipment. Share-wise, everything looks bullish, chart-wise, though, some near-term weakness could nudge shares to initial support near 46. That should be good support – there’s a gap of more than a buck there, and there should be rock-solid support for all but the most bearish situations at 39-40, where there’s a confluence of indicators. Our sell-stop has been around 39-40, but we’ll ease that a bit today to below 39. BUY Trex (TREX) The maker of decking, derived from up-cycled thin-film plastics, is doing everything right but breaking out. Shares continue to show good technicals. We’re loosening our sell-stop to low 99 from near 102 to allow for the possibility that shares may continue to drift until the 200-day moving average makes up ground. TREX has been holding nearer support in the mid-100s and didn’t really suffer much damage from Monday’s market turmoil. HOLD Excelsior Portfolio Our special opportunities portfolio right now consists of warrants in six companies that have gone public or are going public by SPAC. Our horizon here is longer term, as it needs to be with young SPACs. Our rating remains BUY on the six as a basket. We have no sell-stops. Li-Cycle (LICY warrant) Warrants are up 10% in the past week to 2.06 recently. Management gave a number of positives in the third-quarter earnings call last week. Near term, sales for Q4 should rise 50% to 100% from Q3’s $1.7 million as the New York and Ontario plants get up to operating at full capacity, while expansion plans in Arizona and Alabama are on target. A criticism of Li-Cycle is that EV batteries won’t reach end-of-life in bulk until years after EV adoption, so investors have been focused on near-term supply, with demand not an issue. Management now has deals with 14 li-ion battery makers to recycle their scrap. Battery makers discard as much as 30% of lithium in the manufacturing process and supply from that deal is expected to quintuple in coming years. We like management’s emphasis that it needs to execute on plants and securing long-term supply and not worry too much about near term sales and margins. We also like that it has first mover advantage in a market where other, VC-backed businesses are ballyhooed for simply planning to enter lithium recycling. Navitas Semiconductor / Live Oak II SPAC (LOKB warrant) Warrants are up 16% this week to 1.60. The SPAC has announced an October 12 meeting of shareholders to approve the merger with Navitas, a maker of next generation gallium nitride semiconductors. They will be used in solar panels, EVs and consumer electronics. Navitas is believed to be the market-share leader in such semiconductors, prized for their heat tolerance and lower power needs. Shares will trade under the ticker NVTS when the deal is approved, and our warrants will trade as NVTSW. Origin Materials (ORGN warrant) Warrants are up 2% this week to 1.63. The carbon-negative plastics maker had no news of substance this week. Ree Automotive (REE warrant) Ree warrants dipped 2% this week to 1.00, as Morgan Stanley initiated analyst coverage with an ‘underweight’ rating. Ree has plenty of time to execute on its EV ‘skateboard’ chassis plan for our purposes. ReNew Power (RNW warrant) Warrants are up 7% this week to 1.63. ReNew filed a prospectus this morning allowing PIPE investors who financed the merger with the SPAC to sell their shares at any time. Undoubtedly many of them will – it’s the business plan of many PIPE investors – which suggests near-term weakness may be seen. Little news otherwise for India’s largest renewable energy owner/operator. Volta Charging (VLTA warrant) Warrants are down 2% this week to 2.63 but we remain up 19% on the EV charger company. Wall Street brokerage initiated coverage this morning with the same thesis we explained in our June 16 Greentech issue: Volta’s unique take on EV charging – with display ads in high volume area – is a differentiator that allows the company to have a more robust revenue model than simply charging EVs to top up. A key for SPAC businesses is to get their story out in front of investors – analyst coverage, whether positive or not – is one key facet of that. Thank you for being a subscriber. Our next regular update of SX Greentech Advisor is out next Wednesday, September 29. Our next regular issue will hit your inbox October 6. We’re evaluating a new set of ESG SPAC businesses as possible additions to our Excelsior portfolio and are tracking a series of well-positioned businesses for inclusion in our Real Money Portfolio when the time is right. Contact me anytime with questions or comments at brendan@cabot.net.
