Hey There Income Hunter,

 

DC was thrown into chaos last week when Senate Majority leader Chuck Schumer and Sen. Joe Manchin announced the Inflation Reduction Act of 2022.

 

The Republicans were basically sucked into supporting the bill, which was spun as reducing inflation.

 

Yet there has yet to be a reputable body that can prove it will reduce inflation at all.

 

In fact, the Wharton School of the University of Pennsylvania has posted a review that reveals an increase in inflation until 2024, followed by a decrease – but the overall impact is anticipated to be near zero.

 

They do see a reduction of cumulative deficits by $248 billion during the budget window, which is $52 billion less than that estimated by Democrat figures. And the Wharton analysis didn’t find any impact on GDP.

 

However, even if the bill does increase inflation, it would include $369 billion in energy security and green energy spending over a 10-year period.

 

Today, I’ll lay out where the money is going and a couple of stocks that will benefit.

 

Inflated Future

 

It was only a couple of weeks ago that prospects for a green energy bill seemed to die.

 

Then, late last week, Sen. Manchin and Senate Democrats announced support for the act. 

 

Approval is not yet final, but the chances of ultimate passage appear high based on industry reports.

 

Full details of the package are still being worked out, but there does appear to be significant incentives that will have a lasting positive effect on green energy stocks …

 

1. Extension of solar and wind tax credits that were set to decline over the next few years will be extended under the act. 
2. Incentives for new technology previously not eligible for tax credits will be introduced. This includes clean hydrogen and stand alone energy storage, and the incentives may be significant. 
3. New incentives for domestic manufacturing of solar equipment, which historically the U.S. has relied on via import. This bill will change that with generous incentives for domestic solar panel and inverter manufacturing.

So, those three areas …

• Residential solar
• Hydrogen
• Energy storage and domestic manufacturing

 … should see the most significant longer-term gains. 

Now, the important thing to remember here is deglobalization will force countries to domestically facilitate all facets of a business’s supply chain.

So, incentives and fiscal spending investment in domestic manufacturing could pick up in the years ahead. 

Here are a couple of stocks I think offer the value right now:

SunPower (SPWR)

SPWR made some nice moves over the past couple of years to position itself as a top manufacturer in the US residential solar space. 

First, it spun off its legacy Maxeon commercial business and then purchased Blue Raven Solar, a residential solar installer.

The residential market will now be well incentivised to transition over to solar, and so far only 5% of this segment is penetrated. 

This acquisition of Blue Raven Solar  will help SPWR grow its direct-to-customer business by increasing its own installations by 25%, plus it will still tap into its dealer network pipeline. 

SPWR has also strengthened its balance sheet so it could boost growth via capturing more margin potential through its financing arm SunPower Financial. 

SPWR Charting Pattern

The chart below shows the internals for SPWR … 

Notice the rally last week that originated from the high volume shown by the blue and gold volume profile bars on the left. The highest volume bar is at $16.30 and last week's rally was on higher-than-average volume.

We may see a dip to the $18.50-to-$19 price area, which would be a good level to enter into a bullish position with a stop below last week’s low at $15.70. 

Once the Fed shifts back to QE, which I see as inevitable before the end of the year, SPWR should test the $30 dollar area.

Plug Power (PLUG)

PLUG was left for dead after disastrous results in Q1,but the Russian invasion and fiscal stimulus to boost hydrogen as a green energy solution is giving it new life. 

PLUG has an edge on the market for hydrogen because it offers a solution—from fuel cell technology to green hydrogen fuel. This is exactly what the US needs.

I also love that short interest is nearly 13%, which means we could see a short squeeze at some point. Although the shorts may push it down on a renewed demand destruction narrative as we see continued poor economic data.

PLUG Charting Pattern

Notice in the chart below that PLUG failed last week at its high volume bar for 2022,but it has also put in a series of higher lows and higher highs since the low in May. 

I am looking to put on bullish option strategies at $20 and $19 and would stop myself out on two closes below the 50-day moving average at $17.50.

First upside target is $23.50 and then $28.25. 

Bring It Home

It is great to see the administration focus on investment in domestic manufacturing, even if it is a desperate attempt to save the mid-terms and build momentum into 2024. 

I am not bullish on the broad market overall …

However, I am bullish on energy and commodities needed to build our manufacturing base.

One of my top picks is silver, which will benefit from the spending bill (when/if passed) and also from the progress Russia and co. are making on an alternative reserve currency basket backed by commodities and, most likely, gold and silver. 

Stay tuned this week as we continue to get very bad economic numbers – but remain profitable with our trading.

Live and Trade With Passion My Friend,

Griff