Is Stem Setting Up for a Breakdown?
A level of support has formed in the chart of Stem Inc. (STEM). The stock has hit this level a few times and looks to be heading towards it again....
A level of support has formed in the chart of Stem Inc. (STEM). The stock has hit this level a few times and looks to be heading towards it again. If it falls through, a breakout could occur. Read more to learn how to profit from this trade.
Stem Inc. (STEM) is a provider of energy storage systems. The company bundles third-party hardware with its proprietary Athena software to provide customers a turnkey solution. Stem sells its solutions to commercial and industrial customers as well as independent power producers and renewable developers.
The company recently reported record revenue in its third quarter results. Sales rose 334% year over year due to a rise in its backlog that grew 25% from the previous quarter. There is an especially high demand for its smart energy solutions, which are enabled by its Athena platform.
The company looks solid based on fundamentals as its current ratio is 8.3 and its debt to equity is 0. Analysts expect sales to jump 114.7% and earnings to rise 82.9% next year. However, the stock appears overvalued with an EV/EBITDA of 73.8. STEM’s performance has been mixed since August. This is evident in the chart below.
Take a look at the 1-year chart of STEM below with added notations:
Chart of STEM provided by TradingView
STEM has formed an important level of support at $21 (blue) over the past three months. The stock has repeatedly rallied off that mark, but now it has fallen back down to that level again. If STEM were to break support, lower prices will likely follow from there.
If the stock were to break below the $21 support level, a trader could enter a short position with a protective stop order placed above the entry point.
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STEM shares rose $0.05 (+0.23%) in premarket trading Friday. Year-to-date, STEM has declined N/A%, versus a 26.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing.