FuelCell Energy, Inc (NASDAQ: FCEL) soare over 18% on Tuesday on higher-than-average volume, in continuation of a strong reversal to the upside Benzinga called out Feb. 9. The beaten-down stock could be at the beginning of a massive short squeeze due to its underlying statistics.
- Ownership Levels: FuelCell has a high level of institutional ownership, with 42.53% of its float locked up.
- High Short Interest: 68.52 million, meaning 18.69%, of FuelCell’s 353.39 million share float is held short. The number is up from 67.47 million shares held short in December.
The FuelCell Chart: On Tuesday, FuelCell printed a massive green Marubozu candlestick, which can indicate higher prices may come the following day. The stock opened Wednesday with an inside bar, however, which indicates a period of consolidation may be needed before the stock continues to trek higher.
If FuelCell is unable to break up from the inside bar on Wednesday, traders and investors can watch for the break to come on Thursday. The inside bar leans bullish because FuelCell was trading higher before printing the pattern.
The consolidation within an inside bar will help to cool FuelCell’s relative strength index (RSI), which on Tuesday was making a straight shot up toward the 70% level. When a stock’s RSI nears or reaches that level, it becomes overbought, which can be a sell signal for technical traders.
On Tuesday, FuelCell regained support at the 50-day simple moving average (SMA) and on Wednesday morning the stock was testing the level as support and holding above it. When a stock is above the 50-day SMA it indicates longer-term sentiment is bullish. FuelCell is also trading above the eight-day and 21-day exponential moving averages (EMAs) and on Tuesday the eight-day EMA crossed above the 21-day, which is bullish.
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- Bulls want to see continued sideways consolidation on low volume and then for big bullish volume to come in and push FuelCell up over Tuesday’s highest price. There is resistance above at $5.77 and $7.17.
- Bears want to see big bearish volume come in and drop FuelCell down below the moving averages and for continued pressure to cause the stock to fall below the most recent higher low at the $4.53 mark, which would negate the uptrend. There is support below at $4.52 and $3.36.
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