We don't just have one stock market, we have two, writes Jim Cramer. There's the real market which is made up of real companies with real earnings. Then there's the dream market, where hopeful companies with promising new technologies are moving away from fossil fuels and dreaming of becoming the next Tesla (TSLA) .
Despite the ridiculous valuations, the dream market continues to soar, Cramer says, especially in the alternative energy and electric vehicle space. Names like Plug Power (PLUG) are up 1,029% for the year, Bloom Energy (BE) has risen 306%, and newcomers Luminar (LAZR) , Ballard Power (BLDP) , and QuantumScape (QS) continue to captivate investors' imagination.
We looked at PLUG on November 19 and wrote that, "PLUG has reached its daily Point and Figure price target but $31 is a new target on the weekly Point and Figure chart Traders looking to go long PLUG should continue to exercise patience with the rickshaw man pattern noted on the weekly candlestick chart. Existing longs should raise stop protection to a close below $20."
Let's check out PLUG's charts again today.
In this updated daily Japanese candlestick chart of PLUG, below, we can see how prices have really ramped up from their base down around $5. Prices are above the rising 50-day moving average line and they are what I consider extended or overbought versus the rising 200-day moving average line which is down around $11.
Trading volume has been active since late June and the On-Balance-Volume (OBV) line has been moving up to confirm the price gains as buyers of PLUG have been more aggressive.
The Moving Average Convergence Divergence (MACD) oscillator has been bullish since April but crossed to a take profits sell signal in late November. Now prices have rallied to yet another new high but the MACD oscillator looks like it will not make its own new high and thus create a bearish divergence. Keep an eye on this.
In this weekly Japanese candlestick chart of PLUG, below, we can see some more price history. Prices are up 17-fold from the base around $2. If you were an early and far-sighted buyer of PLUG at $2 would you be interested in taking profits now? (Email me your answers.)
Prices are extended above the rising 40-week moving average line. The weekly OBV line shows a strong advance from May. The 12-week price momentum has been rising with the rally but the first lower bar will be a heads up or warning signal that the rally could be faltering.
In this daily Point and Figure chart of PLUG, below, we can see that prices have reached and passed a $35 price target. Sure, prices or rather traders can ignore this measurement but there are probably some technically oriented traders who might be taking profits.
Bottom line strategy: Bullish traders will probably go on about how Congress passed the alternative fuel tax credit and what it could mean for stocks like PLUG, but this news could be discounted already in the price action. If you really believe that PLUG can leap still higher I recommend a sell stop at $31, but otherwise I would consider booking profits and significantly reduce your long exposure.