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American Superconductor

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Posted By kinsaleinsights

I'm long American Superconductor (AMSC), a U.S. maker of highly conductive wire used in electrical utility networks and U.S. military ship protection, as well as its long productive wine turbine design and control business. My measured target is about $20 right now, where I'll revaluate longer term prospects.

American Superconductor (AMSC) first (re)caught my eye in September 2018, when shares broke upward out of a triangle formed the the 50-day and 200-day simple moving average. The flag it formed in early November confirmed the bullish turn shares has taken. The quick leap higher is obvious – forming the "flagpole" – and the downward movement that follows forming the flag is classically bullish as well. I've drawn in gold lines on the chart. The Kinsale Insights Eco Investor newsletter recommended a buy in its January issue, entering the position on January 2 at $11.17.

I won't cover the long bear market in AMSC here, other than briefly noting it suffered terribly from intellectual property theft by China's Sinovel, a wind turbine company  that was its largest customer. From that theft, in mid-2011, until mid 2017, shares lost more than 99 percent of their value. Yes, it's actually worse than the long term chart shows, because of a reverse 10-for-1 split in the interim.

That November flag solidified my belief shares had finally shaken off the bears. The nearly 40 percent spike in prices in two weeks, from $5.99 to $9.71, followed by a period of retreat to the low $8 level that closed out a classic, bullish flag pattern – all came while fighting the headwinds of the broad stock market’s turbulent fourth quarter. Investors had plenty of reasons to take profits (as indeed, it some did in that December 20 spike down) With positive earnings momentum from the third quarter, shares have completed the measured move to $13.50 we projected, on improving volume trends.

More importantly, longer term this completed a long term rounding bottom that started May 2016. With shares firmly over the completion target of that bottom, the $12 area, we see room for sentiment to make a measured advance to $20, at which point we would reevaluate the price outlook. Shares have been in the top 10 performers, relative to the performance of the S&P 500, in the universe of more than 200 environmental stocks we track.  Depending on the timeframe, the only better performer has been Maxwell Technologies (MXWL), simply because of the pending acquisition by Tesla (TSLA), As an aside, Maxwell has long been a favorite of mine (it too was a highly profitable position for the Cabot Green Investor once upon a time)  and it was a pending choice to the Eco Investor portfolio when Musk and crew decided to snatch it up. The one that got away....

Back to the stock at hand. Recent action clearly shows the bulls and bears tussling around $16. Some of that is the usual (and statistically significant) round number profit taking from the great run shares have had. Some may be concern over the lack of immediate news about addition turbine and grid resiliency orders being booked. The daily candles are giving my a little cause for concern. More likely, though, this is a breather and possibly a ease from what's an unsustainable sharp upward trend in the weekly chart. The weekly and monthly chart still look very positive.

 

 

 

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