BLDP: Relative Strength

Bllard (BLDP), a leading fuel cell technology company based in Canada has shown strong relative strength lately vs. the market as well as its main competitors, even though its price has plunged from it recent high of $10 to current price of about $6.

A couple of weeks ago, it reported earning (loss actually) better than the street estimates. The loss was a relatively low 18 cents per share on revenue doubled from previous quarter and on cost reduction. They got several contracts from China. Imagine what further contracts, which seem sure to happen given the current energy prices and people’s concern about environment pollution, will do to the bottom line of the company. It doesn’t take much for the company to be profitable. When that happens, the share price will surge.

Take it a bit further: what happens when orders come in mass!

What if China or India becomes an investor of the Company! Having suffered dearly for losing pricing rights for commodities to Australia and Brizilian companies during the last couple of years, they should have learned lessons from this experience [and from Japan’s] to invest in key alternative energy companies such as BLDP, before they become hot. At lease that would be my recommendation to the governments.

A reminder: relative strength does not guarrentee price increase!

BLDP's weekly chart also demonstrated that the relative strength may not necessarily be an indication of price increase immediately, as happened in last September/October. Sometimes the strength is due to a recent positive news release which will keep people’s interest high for a while. As the time goes by, especially if the market goes south again or the oil price clapses, BLDP may go down significantly again.

Other risks in addition to the market risk:

1. Two words: hybrid cars;
2. The test cars running in China and Europe are not accepted in those countries;
3. The technology behind BLDP’s cars proves to be faulty and/or too expensive.
4. Major stake holders such as Ford or Chrysller may decide to sell their shares in the Company;

Things to watch:

1. Any news of contract or alliance;
2. The upcoming Q3 earning report;
3. Relative strength to other fuel cell players (FCEL, PLUG, etc.)

Summary:

1. Hypothesis: BLDP is setting up for a new up-trend.
2. Risk/Reward: High/High.
3. Action: Accumulate up to 15% while technically strong;
4. Exit Strategy: Sell or cut loss when the hypothesis turns out false.

[Updates:]

1. [8/19/06] Some scary days the past week, but it turned out okay: the drop was just the gap-filling and the uptrend continues. It closed the week at 6.21, higher than the recent high daily colse of 6.17. Underperforming FCEL for a while, but will see how it does next week.
2. [8/25/06] Underperforming FCEL, PLUG and the market. Reduce.