BY BILL GRIFFO 

August 26, 2023

Hey Traders,

Companies that are dedicated to allocate capital to new businesses in clean energy have not fared well after the initial euphoria for everything green.

Generac Holdings Inc. (Ticker: GNRC) fits into that category. They’ve committed to funneling cash into its upstart clean energy activities.

Transitioning to a new area when the economy is in a weakening trend doesn’t seem like a smart decision longer-term.

However, I do see a short-term flip has a high probability play.

Residential Generator Business

GNRC provides residential generators with a wide range of capacity that its large dealer network loves because it makes it easy for the dealers to meet the needs of each home. 

Plus, the company’s dealer network (over 7,000) is by far the largest in the industry. 

The problem with this business is sales depend highly on weather-caused power outages plus,it faces long-term threats from new technologies such as batteries and fuel cells replacing today’s internal combustion engine technology. 

This can all work if the transition to clean energy solutions doesn’t go over budget and time to market.

In the meantime I do see a decent risk/reward set up for a short-term profit. 

GNRC Charting Pattern 

GNRC’s position for a trade looks good. It is building momentum, the MACD (bottom panel) has crossed through its signal line, which is bullish and it is holding the 200 dma:

I would do a simple Sep15 116/121 call spread for 1.85 for a maximum profit potential of 170%.

All you really need is a grid closure or a couple of outages and you could book some nice profits.

Consider also stopping yourself out a close below $112 and then moving onto the next good opportunity. There’s so much uncertainty in the market that it is best to avoid letting trades get away from you.

Plan your trade and trade your plan. And as always …

Live and Trade With Passion My Friends,

Bill Griffo