Do you want the next big thing for your wallet? Today, if we are to believe in a typically unexcited Wall Street bear, that could mean owning Rod (NYSE:STEM). Let’s take a look at what’s happening on and on the price chart, and then come up with a risk-adjusted determination aligned with those results in the STEM action.
STEM shares are officially listed this week as sponsor Star Peak Energy finalized its reverse merger. It happened without much fanfare. And given today’s more conscious, risk-free attitude and weakened business environment for many of the more difficult PSPCs, the lack of enthusiasm might superficially indicate that Stem is the next big thing. For bearish shorts, that is.
But seeing Stem as a short film would be a excessively big mistake according to (ironically) Citron Research.
Lemon. The research team was one of Wall Street’s most infamous bears. Additionally, aggressive and targeted attacks over the years on companies such as Failure and Scandal have plagued Valeant Pharmaceuticals (now Health Bausch (NYSE:BHC)) helped make leader Andrew Left the proverbial EF Hutton for short sellers while putting the fear of God in the bulls. When Mr. Left spoke, investors more than just listened – they ran for exits.
But today’s Lemon is decidedly different. As with many other success stories from last year during the Covid pandemic, the firm has rotated. He’s a longtime advisor now. The firm suspended its bearish analyst public calls following a painful retreat linked to a short sell recommendation in GameStop (NYSE:GME) earlier this year.
Enter the STEM stock
Before you feel sorry or see recovery is a “you know what” for this declawed bear, don’t do it. The company shot 155% last year. And much of the disproportionate return was the result of extensive research into home games such as Video zoom (NASDAQ:ZM) and Nautilus (NYSE:NLS). Perhaps these were less publicized recommendations, given a street where bullish cover is rarely lost.
But don’t be lost with clean, AI-powered energy storage game Stem.
Today, Stem is one of Citron’s latest activist recommendations with a broader twist, “play well with others”. And there are extremely strong reasons why Stem is a name to go long, with an eye for significant profit potential.
I’ll leave most of the devilish details to Andrew detailed note on STEM. But given the moat-like lead of Stem in this growing space, blue chip customers from Amazon (NASDAQ:AMZN) at Walmart (NYSE:WMT) and today’s valuation is paltry relative to its Total Addressable Market (TAM), Stem has a lot to offer.
For investors, there is a lot to look forward to if Citron’s $ 100 price target pays off. And today, looking at the STEM stock price chart, the road to bear fruit for investors could begin today.
STEM weekly stock price chart
Source: Charts by TradingView
A battered and mostly bloodthirsty SPAC environment has left STEM stock trading in a fairly common and deeper corrective cycle since peaking as STPK in February. At worst, stocks have been pruned down to 59%.
Today, however, not far from its recent lows, STEM is shaping up to be a buy that may be on its way to becoming part of the investment elite. Technically, stocks have confirmed a “loose” pattern low in a symmetrical triangle. And given the context, that sounds optimistic.
Buying Stem stocks today with a stop-loss below the weekly pivot is one way to approach a long position. Alternatively, waiting to buy STEM with a change in bullish momentum cannot be criticized. A triangle breakout confirmed by a bullish stochastic cross would pave the way for buy.
Bottom line though, and as well as the story sounds like how Mr. Left explains it, I would also recommend buying STEM stocks with an option-based collar spread. For now, this will cost investors more than fair value, as Stem’s market makers don’t play well with others. Ultimately though, an additional 3% to 4% to buy a hedge and promote the ability to accumulate intelligently when others are running for outings still resonates strongly.
No shares held: as of the publication date, Chris Tyler does not hold, directly or indirectly, any position in the securities mentioned in this article.
Chris Tyler is a former floor-based derivatives market maker on the US and Pacific stock exchanges. The information offered is based on his professional experience but is strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market information and related thoughts, follow Chris on Twitter. @Options_CAT and StockTwits.