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VOLUME


PLUG Powers Higher

02/24/05 08:17:45 AM
by Arthur Hill

Alternative energy should benefit from high oil prices, and it looks as if money is moving into Plug Power.

Security:   PLUG
Position:   Buy

Plug Power (PLUG) has not kept up with the broader market over the last few months, but recent relative performance indicates that this may be about to change. The stock underperformed the Standard & Poor's 500 from January 2004 to August 2004 by falling around 50%. This decline slowed when the S&P 500 bottomed in August, but PLUG was unable to outperform as the relative price (PLUG/SPX) declined to a new low in early January (red arrow). However, the price relative quickly recovered and broke above the trendline extending down from April 2004. This breakout acts as an early indication that PLUG is poised to outperform the S&P 500.

Turning to the price chart (Figure 1), the stock formed a corrective pattern and broke resistance on good volume. After the August-October advance, the stock corrected with a falling wedge and broke above the upper trendline with a surge over the last four weeks. In addition, the stock exceeded its early January high and looks poised to break resistance just above 7. Also note that volume was above average two of the last four weeks, validating the breakout (gray arrows). In addition, upside volume (black bars) has consistently outpaced downside volume (red bars) since November.

Figure 1: PLUG. The stock formed a corrective pattern and broke resistance on good volume.
Graphic provided by: MetaStock.
Graphic provided by: Reuters Data.
 
At the very least, the breakout reinforces support around 5. This level is also confirmed by the trendline extending up from the August 2003 low. Given the high volume breakout and recent volume trends, I would expect the stock to break above the October high and the next target would be the resistance zone around 10-11.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
Company: TDTrader.com
Address: Willem Geetsstraat 17
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E-mail address: arthurh@tdtrader.com

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Date: 02/24/05Rank: 5Comment: 
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