EOT Trade Alert – April 2, 2012
April 2, 2012
Trade Alert:
Buy CLNE June 2012 $19 Puts at $1.30 or better
Company Background:
Clean Energy Fuels (CLNE) provides natural gas as an alternative fuel for vehicle fleets in the United States and Canada. The company designs, builds, and operates compressed natural gas fueling stations. It’s used in automobiles, refuse trucks, and trains as an alternative to gasoline and diesel.
Short-Term Catalyst:
Natural gas prices have collapsed. And they’re heading even lower from here!
The concern is this…
The EPA has issued regulations that are absolutely pro natural gas. They favor it over coal for new power plants and they’re trying to convert governmental vehicles that run on gas or diesel to natural gas. The EPA is so dedicated on getting the United States off for our dependence of OPEC oil, they’re willing to do just about anything.
Unfortunately, the only thing we can do as a nation-is officially declare natural gas THE bridge fuel. Otherwise, the EPA still doesn’t have the power to stop the big oil companies from slowing the demand for natural gas.
Since this scenario is unlikely… company’s like Clean Energy are going to suffer.
Simply put, no matter how much government backing the Natural Gas industry has, the “real bosses,” like Exxon (XOM) and Chevron (CVX), continue to control the Nat Gas usage.
You see… Natural Gas pricing is driven by the use as an alternative fuel. That’s it.
And the problem is we just don’t have enough time or support to extract it. CLNE is in the best position to do this, but they continue to get resistance from the larger oil companies. This doesn’t help anyone.
What’s most concerning is the administration knows that converting governmental trucks and trains off of imported oil in favor of Natural Gas would be huge. These trucks and trains alone are responsible for at least 25% of OPEC’s imported oil. Imagine how favorable it would be to gas prices if the government enforced that.
Bottom line… there’s not enough Natural Gas and refueling stations. And the administration’s full support to convert vehicles is not strong enough. Companies like CLNE can’t prosper.
And this leaves them in a tenuous stock situation that’ll become more and more unrecoverable.
It’s already beginning to happen as we look at the chart. Let’s grab put options on CLNE now to profit as the stock heads lower from here.
Trade Details:
| Underlying Stock Symbol: | CLNE |
| Current Bid-Ask Price: | $1.10 – $1.20 |
| Option “Buy Up To” Price: | $1.30 |
| Break-Even On Stock At Expiration: | $17.70 |
| Maximum Risk Per Contract: | $130 |
Exit Strategy:
CLNE is currently trading at $21.47 per share. Resistance levels will be at $24.50 and again at $25.50. Don’t forget, we want this stock to move lower. Support levels will be at $17.50 and $16.50. Conservative investors should look to exit at the first support or resistance level. Aggressive investors may want to hold for a bigger move.
Chart:
Category: EOT Trade Alert
