Big Gain Hunting: PLUG review

1000% moves. They happen. Traders catch them. How can I  catch these type of moves? Here's my training plan.

Training Regime 

• Study the past movers
• Place the earnings on the chart. What did monthly, weekly, and daily charts look like. 
• What was the volume the day before, after , the next day.
• What caused the move?  If earnings read the 10Qs 8ks, Conference calls 
• Compare to the past.
• Identify entry cues
• How do the moves start?
• Where are the best entry points.
• Stops
• Predict Next movers
• Write up case for the big moves
• Identify entries exits and plan to handle if rises
• Trading plan to sell if it doesn't work out 
• Start Hunting 
• Start with smaller positions
• I'm assuming I'll have many false positives and will fall prey to my emotions when a trade goes wildly in my favor 
• Assess trade
• Build confidence
• Trade with confidence
• Capture monster move.

Monthly Chart Observation:

• Very long neglect period of small weekly moves with low volume.
• First week of December sticks out like a sore thumb in range.  (December 5-6)

Prior to that time $6 million shares would be a huge day.  But within two days 37Million and they 69 Million shares traded on back-back-back days.

Why?

Plug rose 61 percent to $1.27 at the close in New York, the most since October 2008.

The bloomberg story reported that "The fuel-cell maker that hasn’t had net income since its 1999 initial public offering, rose the most in more than five years after saying it expects to be profitable next year.

What is curious is that there was a lag. November 14, 8k. PLUG noted  

The Company continues to experience a significant increase in its bookings since it announced a $6.5 million strategic funding round from partner Air Liquide in May 2013. Orders have been fueled by the investment news, coupled with an investor update on October 8 ^th . On this call, CEO, Andy Marsh, discussed the Company's plans to expand into providing hydrogen, its growth in European markets, and several multi-site customer deals that were in negotiation.

***

I'm expecting a 'blowout' number of orders in the fourth quarter as we start to close some of these multi-site deals and gain new customer wins. I believe that this momentum will result in the 2014 revenue we need to achieve our EBITDAS break even goal."

Yet on an YOY the earnings were not spectacular.   $4.6 million v 4.8 Million.  down 200k from the prior year and they had shipped fewer units.

So why was the CEO expecting "blowout numbers" and why did YOD eventually shoot up over 100%?

On December 4, 2013 The company issued a PR:

The Company has seen an additional 17.8M USD in bookings. Plug Power is currently in negotiations with large customers on sales agreements to deploy turn-key GenDrive solutions at multiple distribution centers. The Company believes this will significantly impact the fourth quarter bookings, as well as provide a recurring revenue stream from product, service and hydrogen contracts. Plug Power expects orders to range between 30M and 40M USD for the fourth quarter of 2013.

Again, the CEO used the phrase "blowout quarter."  This PR started the frenzy.  

Observation:  The initial move was signaled and you can see in hindsight why this happened.  But if you weren't watching PLUG and reading the 8Ks would have it shown up.  I doubt it.  It went from .55 to 67 cents on double volume.  Which would not have been enough to show up on any scans I currently use. 

On December 4, the Company put some meat behind the numbers 10x the revs from the prior quarter.  PLUG Spiked to a high of $2.24  but then slowly retreated on ever decreasing volume.  A low of 2.2Million shares traded  2 days before the next breakout.  By that time, PLUG had given back 1/2 its move as it settled in at $1.60s

• Observation: Unless traders bought right away on December 4,  most of the breakout buyers were probably sitting on losses or at best had scalped small moves.  

• *Entry: This quiet period would have presented the second entry if the Press Release trade was missed. On a weekly chart this was 2 weeks after initial move.

The next catalyst was Plug issuing a PR stating that they had made their "order target":

"Plug Power has seen significant traction closing out 2013, and we expect the first quarter of 2014 bookings to meet or exceed the fourth quarter of 2013," 

This announcement was good for a move from $1.60s to $4.90 within a week. But by January 27, 2014 plug had traded back down to $2.20.

Then it was revealed that the order came from wal-mart.  Analyst then came out of the woodwork saying they anticipated more orders from other big-box retailers and supermarkets. A frenzy ensued pumping PLUG within just a few days to over $10.00.  But faded quickly on news of a secondary offering

Q1 Earnings The next highlight is  First Quarter earnings in May.  

By this point PLUG had sold off to a low of $3.62 

Highlights of CC 
But again the announcement was very positive:

"Already to date in 2014, Plug Power has over $80M in bookings – double the bookings from 2013. Plug Power attributes this increased growth to the successful launch of its GenKey business. The company expects to ship over 650 GenDrive units in the second quarter."  

Plug has now settled in at $5.65 and gone quiet.

• "Year-to-date, the backlog has increased from 1,439 units to 3,719 units as of mid-April. "

• Plug Power’s full year 2014 booking target is $150 million. This year we have already almost tripled our backlog from 2013 and are more than halfway to our bookings goal for the year. 

• the factory has never been this active.
• Q1 was 165 Units so Q2 should have exponential growth.

Potential downsides:

• Dilution via  secondary offerings.  
• Margins on service business were down. Plug explained that this was to help facilitate the Walmart deal but would be positive by Q4.

 Is there another Run?

I had began this analysis as a mental exercise wanting to simply document a monster move that had run its course.  After spending  4 hours of this process, I'm actually believing that there is another big move still to come.  

Plug was somewhat neglected after the first run and perhaps Q2 earnings would take some by surprise. If there is a good entry point, PLUG might be worth a buy.  The downside risk is that with the expected earnings numbers already thrown out it might not cause the buying panic that leads to a monster move.  That being said, I believe a significant move to the down side is also limited.  

I'm very tempted to pick up some shared in advance.  I know, I know,  false positives. ...