Ballard Power Systems

04/17/06 03:15:31 PM

by Koos van der Merwe

With the dramatic increase in the price of oil over the past few years, the only way investors could capitalize on the energy boom was to buy energy stocks. Here's one.

Security: BLDP
Position: Accumulate

The sharp rise in energy prices has made alternative energy very attractive, and alternative energy companies have seen their stock prices accelerate. Ballard Power (BLDP) is one such company. Founded in 1979 and located in British Columbia, BLDP designs, develops, and manufactures zero-emission proton exchange membrane fuel cells. At present, it has strategic alliances with DaimlerChrysler and Ford Motor. BLDP's technology is in various demonstrations throughout the world, not only as an alternative to power vehicles but as a source of residential heat and electricity.

In December 1995, the share price of BLDP was $3.25. The share price rose rapidly with the boom in technology, reaching a high of $144.93 in March 2000, but collapsed with the bubble to a low of $3.40 by May 2005. Since that date, it has been gradually recovering as good news and new contracts have renewed investor interest in the company.

FIGURE 1: BALLARD POWER. Recovery at last?

Graphic provided by: AdvancedGET.

Figure 1 is a daily chart of Ballard Power and shows the low of $3.40 reached on March 13, 2005. The chart also shows:

a. A double bottom formed in August 2005
b. The falling wedge at line A, suggesting a target of $6.54 (5.55 - 3.40 = 2.15 + 4.39 = 6.54). The target reached was $6.88 in September 2005
c. From $6.88, the share price retraced a large pennant line B to form a low of $4.05 on January 5, 2006. This in turn suggested a target of $7.53 (6.88 - 3.40 = 3.48 + 4.05 = 7.53). The share price reached a high of $8.20 on April 7, 2006
d. The relative strength index (RSI) has not reached overbought levels above the 70 parameter, suggesting the share price could well go higher.

What now for Ballard Power?

FIGURE 2: BALLARD POWER, DAILY. BLDP has appeared to have overcome development problems, making it a stock to watch.

Graphic provided by: Omnitrader.

Figure 2 shows the buy/sell short-term levels. The program that calculates a vote based on the strategy that the user has developed is currently suggesting a buy, with a secondary confirmation. The stochasticRSI indicator (8,14) is showing that there could be some downside for the short term that could be taken advantage of by buying on a lower bid, possibly on the support level of approximately $7.00, the 50% retracement suggested by the Fibonacci retracement profile shown.

BLDP appears to be a company that has overcome its development problems, and with the recent news reports of January 26, 2006, and again of March 2, 2006, Ballard Power has proved that it is a stock that should be considered.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.