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August 9th, 2022
The world is watching as today and tomorrow will be filled with Consumer Price Index numbers from countries like Mexico, Brazil, China, Germany, Italy, and the United States, to name a few.
In the majority of countries, the month-over-month numbers are expected to decrease, showing that inflation may have peaked. That doesn’t mean our issues with inflation, stagflation, or slowing demand are close to being over, but these reports could show that we’re slowly moving in the right direction.
It’s yet to be seen if lower CPI numbers will translate to lower prices of goods. How often do we see prices decrease? We could see companies increase their profit margins instead, especially if the job market remains strong and consumers keep buying products and services.
However, we won’t know for sure until the results come out, which is why I foresee continued choppy trading behavior today and tomorrow.
In the meantime, as we look for trade ideas, the U.S. government just handed over a potential big win for one industry. Will we see a boost to the clean energy stocks after the Senate voted to unlock nearly $370 billion this past weekend?
My trade idea from the other day was a bear call spread on First Solar (FSLR) after it already had a nice bump higher from earnings. The parabolic move in the stock price led to me finding the bear call trade with a short strike at $105, a 5% increase above its already 16% increase it had in a few days. Well, that trade didn’t go as planned after the passage of the Senate’s climate bill this past weekend.
First Solar gapped up to open at $109 and rose as high as $114, leaving my $105 bear call spread idea in need of repair. The stock closed at $106.74, so we will see where we go from here. Sometimes that’s just trading. You need to keep a positive attitude and move on to the next idea.
Tesla (TSLA), Plug Power (PLUG), Sunrun (RUN), and others all went higher Monday morning and retreated by the afternoon with the rest of the market. Other clean energy stocks include Fuel Cell Energy (FCEL), Ballard Power Systems (BLDP), and Sunnova Energy (NOVA).
If you’re comfortable trading ETFs and want broader exposure, the iShares Global Clean Energy fund (ICLN) and Invesco Solar fund (TAN) may be right for you.
No matter what side of the political fence you’re on, as investors we’re always seeking alpha – the ability, or edge needed to beat the market. And the government just provided us with liquidity in one industry that has further upside potential, assuming it passes in the House. We will see what happens there, but some stocks are enjoying gains just on the news. The bill was announced a couple of weeks ago and that was all that was needed for PLUG to charge ahead by 25%.
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