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PLUG: Harness The Power Of A Steady Short Squeeze

Five weeks ago, fuel cell stocks, and Plug Power (PLUG) in particular were all the rage. At the end of February, Plug announced a huge contract with Wal-Mart for 1,738 of their GenDrive fuel cell units, to be deployed over the next two years. More importantly in the eyes of many, the deal also included a six year service contract.

For a company that had been struggling to gain mainstream acceptance for a disruptive technology, the blessing of the mighty Wal-Mart was a godsend and the stock reacted accordingly. PLUG closed on February 25th, the day before the announcement, at $3.90 and by March 10th had shot up to over $11…then came the crash. Renowned short sellers Citron released a scathing report that highlighted the fact that Plug had never made money in 10 years of existence. The bubble burst and PLUG plummeted to around half of that price.

As you would expect, the volatility continued for a while, with double digit percentage price swings seemingly every day and huge trading volume.

The three month chart above, though, shows that both in terms of volume and volatility, things have calmed down over the last few weeks. This has no doubt calmed the nerves of those that were holding the stock, but I suspect it may have those with short positions worried, and there are plenty of them. Short interest in PLUG stood at a whopping 30.4 million shares at the end of March, equal to around 21% of the company’s total market capitalization. For…

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