We all know one of the biggest spenders we’ll ever see is Barack Obama.
So there should be plenty of sectors he will prop up, but there is one that is my favorite. Not only do I love the sector because it makes me feel better about myself, but I love it because up until this year, it had been growing by nearly triple digits every single year.
I’m talking about alternative energy. And despite lower gas prices, alternative energy consumption will rise over the next five years.
Obama will make sure of it. He has plans to pump $150 billion into this sector over the next ten years. $15 billion a year is nothing to sneeze at. And the truth is, who knows how much more money will pour into this sector in the coming years.
I say that because Obama also has plans to allocate money to alternative energy from his upcoming $500 - $700 billion stimulus package due early next year.
With hundreds of billions pouring into this sector in the next few years, I don’t see how stock prices can’t move higher. It’s not that the government will directly buy shares of solar and ethanol producers. The government will instead incentivize installing solar panels to your home. The government will also force utilities to get more of their power from alternative energies.
It’s something that’s already happening, really. Most states require that utilities get 10 percent of their power from renewable energy. But that’s nothing.
Governor Arnold Schwarzenegger signed an executive order calling on utilities to provide one-third of their power from renewable resources by 2020.
Florida, Power and Light just broke ground on a 75-megawatt solar / natural gas hybrid plant (it generates solar power during the day and at night runs on natural gas) that would power about 11,000 homes. And because it uses solar during the day, it would prevent 2.75 million tons of greenhouse gasses from hitting the atmosphere. That’s like removing 18,700 cars from the road.
More and more, I’m hearing of proposed solar and wind power plants all across the globe. Wind power alone has grown more than fivefold globally from 2000 to 2007. In recent years, the US has added more wind power to the grid than any other country. Just last year, it grew by 45 percent, making the US the world’s largest wind power producer.
This trend will undoubtedly slow down due to the global credit problems. If people can’t finance new plants, then they can’t install wind power. It’s as simple as that.
And that has really slammed the prices of alternative energy stocks. Some of them are down over 80 percent from their peaks. This is a good thing.
It’s good because what this recession will do is help eliminate the weakest alternative energy producers. Any company that can survive this downturn should do extremely well once the economy picks up speed again. So really, it’s separating the wheat from the chafe.
It’s also letting you buy shares of solid companies at steep, Wal-Mart like discounts.
This is one of the most attractive buying points I’ve seen in years. But I’m still holding back from buying until I see a solid bottoming pattern.
A bottoming chart pattern basically shows you when stocks have stopped dropping. And there are various patterns to look for. For the sake of simplicity, I’m going to highlight two here.
The Double Bottom
The double bottom is one of the easiest patterns to spot. The pattern is made of two bottoms that are roughly equal, with a moderate peak in between. Take a look at the chart below (thanks to stockcharts!).
The trick to this pattern is waiting for confirmation once you believe you’ve seen a double bottom. Confirmation happens once the stock price goes over the peak between the two bottoms (in this case, $39). Once the pattern is confirmed, you should buy.
Another similar pattern is the triple bottom. It’s the same as the double bottom, but with two peaks and three troughs. Again, it’s important to wait for confirmation before becoming a buyer because theoretically, the stock could stay range bound for years.
The Rounding Bottom
Another reversal pattern is the rounding bottom. This is a longer-term pattern that can take upwards of 30 weeks to finally form. It’s easy to spot because a) it takes a long time and b) the prices look rounded on the chart. Take a look at the chart below…
Again, waiting for a confirmation of the rounding bottom is essential if you plan on making money. In this case, the confirmation point would be the high before the stock began the rounding pattern (in this case four bucks a share). Once you see the stock pass that previous high, you should become a buyer.
Other Bottoms
There are various other bottoming patterns you can look out for like an inverted head and shoulders and a falling wedge. I suggest you become acquainted with these patterns so that you’re more likely to find a bottom with any stock you are watching.
As with everything, these patterns won’t always signal a bottom. But more often than not, they can be relied on. In the end, you’ll want to use these patterns along with other signals to make your own determination if a bottom has been found.
You can be sure though, that with all the government money pouring into alternative energy, combined with the historic sell-off we’ve seen, the odds on are our side when it comes to buying opportunities.
It’s quite likely that in the next two to three years, we’re going to see much higher alternative energy prices.
I hope you can enjoy them as much as I will.
Stay free,
By Charles Delvalle
Posted 13Dec2008
Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell
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