According to the weekend edition of Investors Business Daily, the White House has threatened to veto a House-passed bill that would scrap tax breaks for big oil and use the revenue to promote renewable energy. But Bush may offer an alternative.  White House economic adviser Alan Hubbard recently said that Bush’s speech will "generate headlines above the fold that will knock your socks off in terms of our commitment to energy independence."

After reading that I got to thinking about profit opportunities should these headlines really knock my socks off.  I remembered the run that some of the alternative energy plays had after the the last state of union address, particularly in the ethanol space and began to do a bit of research.  It didn’t take long for me to see that someone beat me to it.  Himanshu Pandya of Financial Nirvana recently wrote up a nice piece about these profit opportunities.  Rather than abandoning my article, hopefully I can add a bit to what Himanshu began.

One diversified way to potentially profit both in the short term and longer term is through the PowerShares Clean Energy Fund (PBW). I first wrote about investing in this fund with a March 2006 post at ETF Central titled "Clean Energy Opportunity – PowerShares Clean Energy Portfolio (PBW)"  In the 2 months following that post, the fund ran up more than 20% before ultimately sliding into a lengthy correction right along with the rest of the market in mid May.  Following a 30% correction, a steep drop in crude and a state of union speech tomorrow night expected to highlight ways in which the government will continue to push for alternative energies, I believe it’s time to take another look at this fund, particularly for the buy and hold investor looking out over the next couple years.  However, in the shorter term, the technical picture indicates it needs to spend a few more weeks seeking a bottom.

Boiling it down to a lean, mean clean energy profit producing machine

The following is the current weighting of the PowerShares Clean Energy Fund (PBW).  I’ve taken this list (the original can be found here) and rearranged each group so that the best companies (in terms of technicals and fundamentals) are listed at the top.  For example, in the Renewable Energy Harvesting group, MEMC Electronics (WFR) is a highly profitable company that recently broke out of a base while the last company mentioned, Distributed Energy (DESC), has never been profitable, isn’t expected to be anytime soon and is mired in a long term downtrend.  Companies with an *** next to them are companies I would include if I were putting together my own clean energy fund.  Why not have a more tightly focused fund comprised of just the best?  I’ll put the companies I’ve asterisked into a watch list and compare the performance of my fund versus the Powershares Fund and report back in 3 months. 

Renewable Energy Harvesting – 33% sector weight (11 stocks @2.95% each; +1 banded)

MEMC, WFR. Producer of the polysilicon needed in many crystalline solar PV cells. ***
SunPower, SPWR. Solar, Efficient PV panels with all-rear-contact cells. ***
SunTech Power, STP. Solar, fast-growing and major producer of PV is based in China. ***
Applied Materials, AMAT. Semiconductor fabrication, growing solar PV aspects. ***
Cypress, CY. (Parent firm of SPWR above, and owns the major block of their stock). ***
Zoltek, ZOLT. Wind, makes carbon fiber for wind blades and product ‘lightening’. ****
Kyocera, KYO. Solar PV, integrated manufacturer is doubling production.
Ormat, ORA. Geothermal, works as well in recovered energy, biofuels.
Emcore, EMKR. Solar, 28% ultra-efficient PV cells for satellites and terrestrial use.
First Solar, FSLR. Maker of thin film, CdTe solar panels that reduce silicon need.
Evergreen ESLR. Unique string-ribbon solar PV with efficient silicon-use.
Distributed Energy, DESC. Part solar, wind; mainly in DG, some H2: an integrator.

Power Delivery and Conservation – 21% sector weight (7 stocks @2.93% each; +1 banded)

Color Kinetics, CLRK. Light Emitting Diode (LED) lighting systems. ****
Itron, ITRI. Monitoring, designs energy measurement and management systems. ***
International Rectifier, IRF. Efficiency-enabling electronics producer.
Universal Display, PANL. Organic light emitting diode OLED panel displays.
UQM Technologies, UQM. Hybrid vehicle electrics; motor & power systems. ***
(I’ll throw UQM in the fund based on technicals alone)
American Superconductor, AMSC. Superconductors, ‘no’-resistance 2G HTS wire.
Cree, CREE. LEDs, makes efficient lights, power-saving electronics.
Echelon, ELON. Networking, for management of whole energy systems.

Cleaner Fuels – 17% sector weight (7 stocks @2.43% each)

Praxair, PX. Hydrogen, a supplier of many industrial gases. ***
Air Products & Chemicals, APD. Hydrogen, a supplier of many industrial gases. ***
Andersons, ANDE. Biofuels and ethanol; highly diversified across agribusinesses. ***
MGP, MGPI. Biofuels, ethanol and fuel alcohol. ***
Pacific Ethanol, PEIX. Aims to be a leading biofuels producer for Western U.S. ***
VeraSun Energy, VSE. Biofuels, is the 2nd largest corn ethanol producer in U.S.
Diversa, DVSA. Enzymes to convert biomass, cellulosic feedstocks into biofuels.

Energy Storage – 13% sector weight (4 stocks @2.87% each; +3 banded)

Fuel Systems Solutions, FSYS. Gaseous fuels integrator for cleaner-fueled vehicles.***
OM Group, OMG. Producer of nickel and precursors in rechargeable batteries, FCs.***
Ultralife Batteries, ULBI. Batteries, advanced lithium ion, polymer rechargeable.***
Energy Conversion Devices, ENER. Very diversified: in batteries, solar PV, also H2 FCs.***
Active Power, ACPW. Flywheel power storage, a firm power alternative to batteries.
Maxwell, MXWL. Ultracapacitors, a battery alternative such as for hybrid vehicles.
Quantum Fuel, QTWW. Hydrogen gas storage systems for cleaner-fuel vehicles.

Energy Conversion – 11% sector weight (4 stocks @2.50% each; +2 banded)

All of these companies are years away from being profitable! I would not include any of them in my clean energy fund.
Ballard Power, BLDP. Mid-size fuel cells, makes mainly PEM FCs.
Capstone Turbines, CPST. Micro-turbines 30-60 kW, may be flexible-fueled.
FuelCell Energy, FCEL. Large fuel cells as stationary high-temp. flex-fuel MCFCs.
Hydrogenics, HYGS. Fuel cells and testing gear, H2 electrolysis, regenerative FCs.
Medis, MDTL. Micro fuel cells, designed for liquid-fuels and a unique electrolyte.
Plug Power, PLUG. Mid-sized fuel cells for distributed generation, home power.
Greener Utilities – 5% sector weight (2 stocks @2.50% each)
Puget Energy, PSD. Wind, Utility. PSD is growing its wind power.
Idacorp, IDA. Hydroelectric, Utility, mainly hydro; also some fuel cell research.

Playing the Individual Securities

The Advanced Energy Initiative set a goal of replacing more than 75% of our oil imports from the Middle East by 2025.  Our national security depends on it.. not better armor, bigger tanks or missiles with greater precision.  I’ll use an outline of the initiative here as a framework to look into the alternative energy field and highlight investing opportunities. Currently, the most profitable clean energy companies (WFR, SPWR, STP and AMAT) hail from the the solar arena and this will probably continue (see Wal Mart’s Solar Energy  Vision by Joel Makower)… it’s the place to be right now.  I’ll take a closer look at the Solar industry in part II of this report in a few days.In the meantime, I begin with a look at the first part of the initiative – achieving greater fuel efficiency in transportation.

1. Changing the Way We Fuel Vehicles

• Develop Advanced battery technologies that allow a plug in hybrid-electric to have a 40 mile range operating solely on a battery charge

Beginning with the Toyota Prius in 2001, hybrid vehicles are quickly gaining in popularity which can be seen in both the stock prices of Toyota (TM) and Honda (HMC), the 2 big Japanese automakers leading the hybrid gas/electric initiative.  These cars are an important first step and add significant fuel efficiencies, but their batteries are charged by the gasoline engine and only play a minor role in powering the car.  The next step (and profit potential) will come in the form of a plug in hybrid vehicle generating greater fuel efficiencies than current hybrids due to the increased role of the battery. 

I’ve tracked down a few speculative plays in the plug in hybrid space that could move in the next few days.  Both companies provide key components of the soon to be released all electric Sport Utility Truck (SUT) by Phoenix Motorcars, Inc.  UQM Technologies (UQM) a part of the Powershares Clean Energy Fund (PBW) develops an electric propulsion system that will produce enough power to accelerate the vehicle from 0 to 60 in 10 seconds with a top speed of 100mph!  Altair (ALTI) will provide the NanoSafe battery pack which can be charged in 10 minutes and travel 100 mph on a single charge (Phoenix is working on an upgrade that is expected to increase that to 250 miles).  Very impressive indeed!  Phoenix will have far exceeded that government goal of developing a plug in hybrid that travels 40 miles on a single charge.  Phoenix is a private company but a way to play it is through a purchase of Altair (ALTI), which now owns a 16.6% stake in the company as part of their agreement (see more about ALTI below).

Of course much of this could be PR hot air so we’ll have to wait and see.   They are expected to sell for about $45K initially but will drop significantly if the government begins to purchase them.  According to the company it will cost $3/per charge.  Considering the average sport utility vehicle needs somewhere around 13 gallons of $3/gas to go 250 miles (as, it will be about 13x cheaper to run the electric vehicle… If you assume the average miles traveled in a year is 15K miles, you would save approximately $2K/year in fuel.  Compare a 25K Ford SUV to the current price of the Phoenix SUV and it would take you 10 years to make up the difference in fuel cost savings.  OK, so clearly not practical for the average household, but in 2 – 3 years it will begin to offer huge cost advantages.  It will be fun to watch how all this plays out. 

UQM is seeing some buy interest as indicated by the chart below:

:::: More Plug In Hybrid Articles ::::

2007 – Year of the Electric Car (a must read)
Phoenix Books 75 Orders for Their SUT
Plug In Hybrids – How Electric Cars Could Change America
Daimler Chrysler to Test Plug In Hybrid Vehicles With Lithium Ion Battery
Ford Unveils Plug In Hybrid Hydrogen Fuel Cell Vehicle
The Tesla Electric Vehicle Takes on the Volt Electric Concept

• Foster the breakthrough technologies needed to make cellulosic ethanol cost competitive with corn based ethanol by 2012

I tend to agree with others that ethanol isn’t going to be the long term answer for decreasing our dependence on foreign oil, but it does have strong support from both parties (hey it means votes in America’s heartland).   In last year’s state of the union, Bush targeted the use of ethanol as an important strategy to decrease the use of oil and this industry surged as a result.  Companies like Pacific Ethanol (PEIX), Andersons (ANDE), VeraSun (VSE) and MGP (MGPI) should do well again but I wouldn’t expect to see the same kind of run they had last year.  This industry certainly moved yesterday and could spike some more after the State of the Union.  Tomorrow night, Bush is expected to call for a sharp escalation in the federal mandate on the use of ethanol.

• Accelerate progress towards the President’s goal of enabling large numbers of Americans to choose hydrogen fuel cells by 2020

This technology still has a long ways to go and getting the infrastructure in place to make it practical for many Americans will take many years.  As I mentioned above, I prefer opportunities in the hybrid space which is much closer to reality.  None of the fuel cell stocks (see the PBW components above) are anywhere close to profitable and their charts look awful.  I’d stay away from this group for now.

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The second part of the initiative focuses on changing the ways we power our homes and businesses through the use of clean coal technologies, nuclear energy as well as renewable solar and wind energy.  I’ll take a closer look at these industries and the profit opportunities in them in a future article (the solar plays were mentioned above)

Disclosure: Of all the companies mentioned above I only own a small position in VSE

Tis the season for predictions and none are more critical to your financial future than those revealed by Wall St’s finest.  Hard hitting Street reporter Tyler (Heywood) of BigBigNews , who won’t stop at anything to get them revealing their best recommendations for the New Year.  Says Heywood, "Not everyone has a nose for picking stocks!"  Eat your heart out Jim Cramer.

On a more serious note Tom Lydon of ETFTrends.com has just written up a fantastic article taking a look at 10 big trends for ETFs in 2007.

1) Global ETF’s will continue to outperform their domestic counterparts
2)  Actively managed ETFs hit the marketplace with a thud
3) The ranks of ETFs will continue to explode
4) Fidelity finally joins the party
5) The emergence of emerging markets
6) Lower fed rates boost bond ETFs
7) ETFs get ready for retirement
8) The next big gold rush
9) Bear market ETFs
10) And in the truth is stranger than fiction category….

Check out the full article on ETF Trends

It’s time again for another rousing rendition of the breakout stock highlights report… and it’s a good one so hold on to your britches.  Ok, well maybe not that good.  There are many high quality breakouts over the past few weeks and I’ll highlight just a few in this report but that doesn’t mean it’s time to bet the farm on these plays.  I’m still advocating a cautious approach up at these levels especially considering we have important data and announcements coming up tomorrow morning (inflation PPI, housing starts) and Wednesday (rate decision).  That said, here’s the breakdown of the past couple weeks. 

In the two week period there were a total of 37 breakouts tracked in my database (actually 3 are  included in the top rankings but not shown in the screenshot I’ve provided for you below because they were added or their pivot points adjusted after the screenshot was taken).  These 3 are highly rated and worth looking into further – Highland Hospitality (HIH), currently the highest rated stock in the database with a score of 55 out of 60; BlackRock (BLK) and MEMC Electronic Materials (WFR) both with overall ranking of 52 out of 60.  All three are outstanding companies with nice looking charts.

Got off track there a bit.. back to the data.  Of the 37 breakouts, 25 have finished the period with a gain, 7 with a loss and 5 with no gain.  All in all, a very successful couple of weeks for breakouts.  Only 2 stocks finished the period with a loss greater than 8% – Agnico Eagle Mines (AEM) and Himax Technologies (HIMX).  Himax Technologies (HIMX) however, continues to hold up well and could still stage another breakout.  The big winner and one of the top breakout stocks in the database for several weeks now is US Global Investors (GROW) with a whopping 29% return following its breakout on September 1st.

:::::>  As always, here’s a screenshot of the database that shows some of the top breakouts

I’d like to highlight a few of the charts of top breakout stocks showing good technical action and not too extended from a proper buy range.  Starting it off is Comtech Group (COGO) which first broke out on September 11th with very good volume above 12.90.  Notice the dry up in volume at the bottom of the base, the surge in the right side, followed by another dry up in the handle, followed by another surge in buy volume at the breakout.. all classic signs of building demand for a stock.  The action of the past 3 days however have been slightly negative and probably indicate the stock needs some time to consolidate recent gains.

Next up is International Securities Exchange (ISE) which has benefited from a surge in the brokers/exchanges group.  I have this company as the highest rated in this industry and although its carved out a somewhat steep base (correcting around 40%), the positives can’t be ignored.  The stock showed good institutional support at its 200 day moving average on 3 occasions this summer and it’s beginning to show good demand.  I’d probably want to see it confirm it’s breakout by getting above today’s high with volume at least 50% greater than average.  However, another lower volume decline to around 44 may offer a better entry.  Should the stock test its all time highs, I’d be tempted to lock in some profit given the severity of the correction.  That’s just me though.  I’m never disappointed in taking a profit too early.. unless of course I’m referring to TASR a couple of years ago when I locked in a quick 50% gain only to watch the stock get away from me.. and uh.. yeah I’d rather not talk about that one.

Over the past few weeks maybe you’ve noticed the parabolic move in Copa Holdings (CPA), the Panamanian airliner that’s risen 50% in just the last month alone.  The growth in this airliner, capitalizing on the Panama boom is mighty impressive, but the growth in GOL Intelligent (GOL) airlines, the Brazilian airliner is staggering.  Its earnings growth has been nearly doubling in each of the past few years and isn’t yet showing any signs of slowing down.  Looking at the chart, you see a good bounce off the 200 day moving average while carving out the second leg down of its somewhat asymmetrical double bottom base.  This is the first time its touched the moving average in almost a year.  It bounced off that area back in October 2005 as well as April 2005.  So, the uptrend marches on with a recent breakout above the middle peak in the W shaped base above 36.50.  The stock has stalled a bit, but has some support around 35.. certainly worth watching.  It’s the highest rated airliner in the database.

Last, but not least is a favorite of mine – Perficient Systems (PRFT).  A small, fast growing company off the radar of most investors with an outstanding looking chart.  After carving out a bullish looking shallow base, it broke out to multi year highs with a very good pick up in trading volume.  Its been consolidating those recent gains and still looks outstanding.  Something I’ve discussed in these reports many times before is the how a stock offers multiple entries.  The first entry was provided on a breakout above the short handle with near record volume on September 8th.  The stock provided a second entry point the very next day as it took out multi year highs above 14.47.  Now the stock is offering yet another chance as it pulls back to what should be a strong area of support around 14. 

Note: For purposes of full disclosure I do currently have long positions in PRFT and WFR.

Over the past couple weeks, particularly in the past few days, several of the SelfInvestors.com highest rated breakout stocks have been soaring to new highs with outstanding volume as new leaders emerge.  As the market meanders higher with less than inspiring volume, some individual stocks are making explosive moves.  Highly rated companies such as US Global Investors (GROW), Silver Wheaton (SLW), NewMarket Corp (NEU), Copa Holdings (CPA) and Bolt Technology (BTJ) all made new all time highs today with very good volume.  Here’s a look at the charts of these companies…

As always, you can view the list of top breakouts (these are stocks ranked 50/60 or above and have already broken out) here.

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As much as I’d like to highlight all of these top rated breakout opportunities BEFORE they happen, the advertising here pays very little and doesn’t compensate for the full time job of researching, analysing, ranking and maintaining my database of stocks.  Not to mention it wouldn’t be fair to my paying members.  How about giving the SelfInvestors.com premium service a try for free for 30 days?  I guarantee you won’t be disappointed.

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Despite the successful breakout of some of my highest rated stocks, I still maintain an increasingly cautious approach as the major indices march towards major resistance levels with very little wind in their sails. 

In my weekend report to registered members, I mentioned the following:

With economic data of last week showing signs of a soft landing, the market continued to march higher, albeit in unmeaniful holiday trading.  With trading volume levels returning to normal levels later this week, we should begin to see signs of the market showing its hand.  I continue to believe that the market has come too far, too fast, with little institutional support behind the move in the past couple months.  With resistance at multi year highs in both the S&P (1326.70) and Dow (11670.19) as well as the 200 day moving average for the Nasdaq (about 2230) on the horizon, it’s important to proceed with caution on the long side.  There is some room to run to the upside before meeting those levels, but once those levels are reached I’ll be playing the market as if that is the end of road.  Essentially, I’m forcing the market to prove me wrong by breaking out to new multi year highs in the Dow and S&P and above the 200 day moving average for the Nasdaq WITH BIG VOLUME.  Only then will I get aggressive on the long side.

Here’s a look at the charts of the major indices.  If we get a few more moves up to resistance with lackluster volume, you better believe i’m increasing my short allocation big time.

You see the Dow marching toward its multi year highs of last May.  The fairly steep incline and lack of volume (whether its typical of this time of year or not) are a concern as it approaches this formiddable resistance level.  Be careful up here and consider locking in some of those profits soon.

Similar scenario for the S&P500.  At the very least, it needs to come in a bit and retest that steep trend line.

The Nasdaq isn’t close to resistance of multi year highs, but it is close to strong resistance of the 200 day moving average.. an area where it retreated from back in June.

With the rising market has come a slew of quality breakouts.  It’s been a loooonnnggg week so I’m going to be brief here and just throw up the charts of a couple of my favorites right now.  Remember to avoid chasing any positions at this point.. the market needs to digest recent gains and many of these opportunities will most likely pull back a bit offering a better entry point.

As always, you may see the full list of high quality stocks (total rank 50/60 and above) that have
broken out in the past couple weeks.

In a bid to catch Google in search advertising, Yahoo unveiled portions of its long awaited platform at the Search Engine Strategies convention in San Jose today.  There doesn’t appear to be any earth shattering features at first glance, just "me too" features in line with what Google already provides such as targeting geographic areas and creating budgets for their campaigns.  The one glaring difference is the abolishment of an auction style bidding system in which companies bid for placement in the search engines.  Some business are already complaining because of the lack of transparency.  In the existing Yahoo system (as well as Google), customers could bid just one cent more to appear higher in the search engines.  Not knowing what others are paying for keywords takes this advantage away, potentially creating more revenue for Yahoo.  However, the lack of transparency may drive advertisers away.  We shall see.  Yahoo’s new system is set to launch in the 4th quarter or in the first quarter 2007.  Given, the long delays already, I’d put my money on the first quarter at the earliest. 

Here’s a link to the full Red Herring article

With the market staging a rally in the last half of July, the number of breakouts picked up significantly and the success rate was much higher.  New leaders are emerging in banking, telecom and health/drug related issues as the market tries to pull itself out of the correction.  Oil stocks also continue to do well as most continue to report record profits. 

IN the last half of July, there were total of 41 breakouts tracked in the SelfInvestors.com Breakout Tracking database, with 22 finishing the period with a gain, 2 with no gain and 11 with a loss.  Just 2 stocks dropped 8% or more, indicating a failed breakout.  That’s a darn good success rate.  If you were in oil and banking stocks you did well at the end of the month, with about half of the breakouts occurring in these industries (10 in banking, 8 in oil). 

The biggest breakouts, with gains of 18% from the breakout occurred in Grupo Simec (SIM), a Mexican steel producer; Datalink Corp (DTLK), a data storage solutions provider and Flag Financial (FLAG), a small bank holding company providing banking, mortgage, investment and insurance services.  The biggest loser was no contest – Baidu.com (BIDU) plummeted 27% during the period and is currently testing support of its 200 day moving average.

Below is a screenshot of the database with shows the top 8 breakouts for the last 2 weeks of July.  Please click here to see the larger image.

The top 2 highest rated breakouts for the period just happen to remain in a buyable range (although technically Gilead Sciences should get a new pivot point sine the break above the handle on 7/26 was with weak volume).  It would provide a nice entry on a break from current consolidation above 63.  The top breakout in the period was once again a bank stock!  If you haven’t had a chance you may like to see the last Breakout Highlights report, in which I highlighted one of the highest rated bank stocks in the database – Cascade Bancorp (CACB).  It’s currently well extended past a proper buy point, but may consolidate soon. 

Let’s have a look at the charts of a couple top ranked breakouts – Gilead Sciences (GILD) and Bancorp (TBBK).

TBBK first broke out on July 19th and it looked like at the time it would be off to the races like other high quality bank stocks.. but the very next day it reversed course and has been meandering quietly since.  I thought that its earnings report yesterday would be more of a catalyst for movement in either direction, but it continues trade quietly.  Although it remains in a buyable range and above key support of the 50 day moving average, I’d be hesitant to initiate a position here before the next Fed meeting.  I"m holding off on this one until after the Fed meeting unless it stages a big high volume move out of this consolidation before then.

You see the first breakout attempt with poor volume, so a purchase there should have been avoided.  GILD is a great company and has formed a decent looking base, but it’s a bit on the severe side in the left of the base.. I would probably avoid this one at the breakout unless it was showing volume at least double the average.