Plug Power stock price has stabilized in the past few weeks, ending the recent plunge that pushed it from last year’s high of $4.57 in October to a low of $1.70 in November. It was trading at $2.28, up by 35% from its lowest point in November. This article explores why the stock may crash soon as a risky pattern forms.
Plug Power stock price technical analysis
The daily timeframe chart shows that the PLUG stock price has crashed in the past few months, moving from a high of $4.57 to the current $2.28.
It has remained below the Supertrend indicator, which has remained in the red in the past few months. In most cases, an asset remains in a downward trend as long as the indicator is in the red
Most importantly, the stock has formed the risky bearish flag chart pattern, which is made up of a vertical line and an ascending channel. It has also dropped below the Strong, Pivot, and Reverse level of the Murrey Math Lines tool.
Therefore, the most likely scenario is where the PLUG stock continues falling, potentially to the next key support level at $1.56. This target is at the Ultimate Support level of the Murrey Math Lines tool, which is about 30% below the current level.
However, a move above the upper side of the ascending channel will invalidate the bearish outlook and point to more gains, potentially to the Major S/R pivot point at $3.15.
PLUG stock chart | Source: TradingView
Plug Power is facing major headwinds
The company is facing major headwinds, which will likely push it lower in the coming months. One of the biggest challenges is that some analysts have downgraded the company. The most recent downgrade came from analysts at Cowen, who slashed the target from $4 to $2.
Susquehanna, Morgan Stanley, and BMO analysts have also downgraded the company in the past few months, raising concerns about its growth prospects.
Another major risk is that the company’s shareholders are voting on whether to increase the number of authorized shares from 1.5 billion to 3 billion.
In its statement, the management noted that increasing the number of authorized shares will help it to maintain operating flexibility, which is a coded word for dilution.
Plug Power has been one of the most dilutive companies in Wall Street. It has raised the number of outstanding shares from 214 million in 2018 to 1.2 billion today.
It diluted its shareholders as its losses soared. Data shows that the company had a net loss of $2.1 billion in the last financial year and over $5.2 billion in the last five years. The most recent fundraising happened after raising $375 million in convertible senior notes.
The company will likely raise more money in the future as its profits remain elusive and as its backlog drops.
At the same time, the company is highly shorted, with its short interest rising to nearly 25%. That is a sign that many investors still believe that the company has more weakness to go. However, in some instances, it is normal for highly shorted companies to surge as they go through a short-squeeze.
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