Will FuelCell Energy See A Long-Term Reversal Or A Dead Cat Bounce? A Technical Analysis

FuelCell Energy, Inc FCEL spiked over 6% higher at one point on Friday morning on continued bullish momentum after negating a bear flag pattern Wednesday.

The stock has surged about 20% since July 7 amid general market strength caused by a lower-than-expected June inflation report.

On July 14, despite the early session surge, the stock was falling to near flat, indicating the local top may be in.

See Also: What's Going On With FuelCell Shares?

Having declined about 92% since the Feb. 10, 2021 all-time high of $29.44, FuelCell could be in for a longer-term reversal or the recent move north could be part of a shorter-term dead cat bounce — a temporary recovery that ends up being a bull trap. Which of those two scenarios comes to fruition is likely to be determined by whether the stock can break up from a descending trend line that’s been holding it down since Feb. 3.

A descending trend line acts as a resistance level and indicates there are more sellers than buyers even though the price continues to fall.

In order for a trend line to be considered valid, the stock must touch the line on at least three occasions. After that, the more times the trend line is touched, the weaker it becomes.

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The FuelCell Chart: Although FuelCell negated its downtrend, the stock hasn’t yet confirmed a new uptrend on the daily chart by forming a higher low above the most recent lower low of $2, which was printed on July 6.

If FuelCell closes the trading day under the $2.50 level, the stock will form a doji or shooting star candlestick, which could indicate the local top has occurred and FuelCell will retrace on Monday.

• Should FuelCell fall lower over the next few trading days, bullish traders can watch for the stock to eventually print a bullish reversal candlestick, such as a doji or hammer candlestick, to indicate a higher low will occur and the uptrend will be confirmed. When FuelCell retraces, the stock may find support at the eight-day and 21-day exponential moving averages and the 50-day simple moving average, which are all trending at about $2.27.
• Bullish traders want to see an uptrend confirmed and then for FuelCell to continue trending higher until the stock breaks up from the descending trend line. If FuelCell can break above that area, a longer-term bull cycle could be on the horizon.
• Bearish traders want to FuelCell fall under the moving averages, which could accelerate a move to the downside.
• Once FuelCell drops under those levels, bearish traders will want to see it happen on high volume for more confidence an uptrend won’t play out.
• FuelCell has resistance above at $2.61 and $2.73 and support below at $2.32 and $2.

Image: FuelCellEnergy.com