Despite the government’s intervention and subsidies for the industry, newer technologies are needed in order to make ethanol more viable - and the industry’s companies profitable. A good example is
Pacific Ethanol (Nasdaq:
PEIX) - a company that Bill Gates invested in heavily a few years ago, paying $12 a share. Today, the stock trades for just $0.40.
Below is a daily chart of PowerShares WilderHill Clean Energy (NYSE: PBW), which is currently at a critical juncture:
Chart: http://www.investmentu.com/images/iu063009chart.gif
Three Scenarios for the Clean Energy Fund
As you can see, when the stock market bottomed out in March and oil prices retested their lows, PBW’s Clean Energy Fund did the same.
Since then, however, PBW has doubled off those lows to the June 10 high of $11.37. This is right around the swing high of $11.40 that it tested back in November, before it pulled back to the trendline drawn off the March lows.
In addition, the 50-day and 200-day moving averages are very close to crossing one another - a development that sometimes indicates a short-term top.
So what we have here is a relatively clear-cut conclusion…
- A close above $11.40 would be bullish and should lead to higher prices.
- However, a close below the trendline, currently around $10, would be bearish over the short-term.
- A close or two below the 50-day and 200-day moving averages, which are currently around $9.50, could lead to a move down to $8 or lower.
Good investing,
Jim Stanton
