Why the recent price bottom - and where are we going now?

Anyone who's held this stock this last 2 months has absolutely hated life if they were long. On Wednesday we saw some hope though and I believe we will continue to see hope. The reason - the chart to my left. Nope, that's not PEIX, although it looks like it a bit. That's Ethanol Futures. At the beginning of September you can see a drop in Ethanol futures and you can also see a matching drop in PEIX.

PEIX history over the same time period

It doesn't take a rocket scientist to see why we've recently been coming back up in the stock over the last 2 days.

As Neil Koehler stated, there's a temporary pullback in price and he believed it was just that, temporary. Ethanol futures are climbing fast and it appears we've hit the bottom on them.

Other Factors

Beyond just the temporary down swing of Ethanol prices, we know that this is the time of year most companies perform yearly maintenance on their plants so we will likely see supply drop and ethanol prices rise further over the next few months. 

Options Expiration day - that's today. Wonder why we have not seen the jump of the last 2 days? This is it. The other piece is there are some profit taking due to a 33% rise in less than two trading days from the trend traders. 

Also, with the Ebola scare, the whole market has not helped as the drops are compounded. 

However, one other GREAT piece of news for ethanol is corn is falling again and ethanol prices are rising again. We won't see great margins in the future...they're already here! Today. Now would be a good time to get back in if you got out of this stock. With a solid earnings report, this will be back in the 20's range in 30 days.

Pacific Ethanol - The bleeding is likely over

The last few weeks have been painful if you were a long holder for PEIX. With the whole market coming down and news that corn futures are up some and Brazil is offering an export credit, PEIX was an easy target for profit taking by some of the big boys.

At the very end of close on Friday someone purchase about 1 million shares. This was likely someone covering their short position and going long.

It's also likely not a coincidence that we've gotten back to levels near Q2's closing price. If we would have been in the mid to low 20's the last day of September we would be looking at around an $8 million hit to earnings.

It's clear the pushing down has ended as we've seen a pretty steady last few days. Likely what will happen is the price will hold around this level until October and then start its run upwards again.

Today's weekly Ethanol Inventory report was positive for PEIX as inventory has dropped. GPRE and REX were both up today on the news, but PEIX will be held down through September (end of Q3) before we likely see this rise due to the above mentioned desire to keep the FMV adjustments to a minimum.

Next week's Ethanol Inventory report is likely to be even better due to some exports being counted that were just sitting in the Gulf Port waiting to be exported, but due to technically being on American soil they were counted.

I can't stress this enough - this is likely one of the best buying opportunities PEIX has had all year. It's certainly not a guarantee, but with the indicators mentioned, it's hard to ignore that this will likely go back up -

• Large 1 mill share purchase end of Friday signaling potential institutional investment. 
• Price hold-down to not get killed by Fair Market Adjustments on outstanding warrants.
• Ethanol Supplies declining. Next week should be even better!
• GPRE and REX up today.
• 3 day price stabilization indicating the bleeding has likely stopped and we're now just awaiting Q4 before climb back up.

EDIT (4:26PM MST 9/24/2014):
It should also be mentioned that we should expect a Fibonacci retracement. A 62% retracement of steep gains is typical, expected, and actually healthy. We hit that around $15.60 and it's held nicely. The same retracement happened when we fell to the 10s earlier this year.

Pacific Ethanol - why the big drop? And what to expect

Crazy day indeed! It started down because of the struggling market in the morning and because oil and ethanol prices have dipped. Then they started picking off stops to create a panic sell. They succeeded. This is a definite overreaction and another reason to never put stops on PEIX. Margins are still great though. And it bounced nicely off its lows getting back about half of the morning losses. The next few days to a week could be volatile as it has to now get above the 20 day MA again. But in the long run, I'm not worried. And the 4 investor's conference they're doing next week will help. 

Pacific Ethanol Stock Price Going into the Long Weekend

I personally am not an expert. I was introduced to this stock by one though. Every step of the way he's called his shots and his gains he's seen make me look like a child with a water gun. When he introduced me to this stock it was trading at 36 cents (pre 15 to 1 reverse stock split). Basically $5.40 after the split. I bought in at $3.80 range in May of 2013 and then sold when the stock capitulated to $2.80 in November 2013...and lost a bunch of money. I was so tired of watching this thing drop so much day over day and over that period the stock was basically on a slow downward trend. 

At our semi-weekly beer drinking sessions he would explain what was going on with this stock and we'd discuss the manipulation that occurred that past week and he'd pull back the curtain to what was a very interesting mix of people manipulating this stock for their gains day over day. To say it was educational would be a giant understatement. 

Immediately after I sold at $2.80 the stock pretty much started it's upward trend and that was a hard lesson for me to learn. My friend hadn't sold, but the opposite, he bought in MUCH more. To him it was an absolute no-brainer. The book value was at around $8/share, so even if it all fell apart, he'd still get paid big. When we met the next time for drinks I told him I sold. The stock had already started coming back, but all I knew of it for six months was DOWN and I couldn't take it any more.

Sell Low, Buy High, right?!??

Of course, right after I sold, within days it was back up. I eventually got back in...heh....at $8.22. The chart above shows where I sold at $2.80, then had to re-buy in at $8.22.

After I bought in I honestly thought I was cursed!! I literally bought RIGHT at the peak of the chart above and immediately (like in seconds) the stock started falling! I took a big gulp the next couple days and bought more at $7. I was not going to watch the charts for the answers anymore as that had failed me. I knew where this one was going now and I was going to Buy the Dips, man up, and just hold on. So glad I had learned the lesson.

The big lesson I learned was that when you know where the stock SHOULD be, don't get scared about the day to day moves it's making. Trust your knowledge of the company make decisions on facts, not fear. The guy who introduced me to this stock, and who will be writing some insightful articles eventually on this blog, was never terrified because he knows more about the stock and industry than 99.9% of the investors. His decisions are coming from facts. Mine were greed and fear. 

He thinks this stock is going to $40. He's YET to miss his shot - he called the $10 stock price on a fair market adjustment and he's called the stock price the whole way. I have no doubt it'll get there. 

Today he thinks we'll see low volume prior to the 3 day weekend and a potential to see the stock dip as it's easier to manipulate on low volume. At the time of this post though, we're sitting just below $23 so it's good to see it's gone the other way! So far though, we're trading on pretty low volume. Below 500k.

See you at $40. Hopefully by next earnings report!

The Street Posts a great article on PEIX

Just visit the link. A GREAT article that breaks down strong moves on high volume.

http://www.thestreet.com/story/12858583/1/strong-on-high-volume-pacific-ethanol-peix.html

REX, an ethanol producer, had great quarter 2 earnings come out today that reflected what can happen in the ethanol industry when you put it all together for a really solid quarter...much like the one that Pacific Ethanol is in right now. This indicator of potential is helping move all the ethanol sector up today and is the proof the large investors needed before buying all-in on ethanol.

PEIX's steady growth and why it will continue to creep upwards

Pacific Ethanol stock continues to gain day over day, but why? There has been no real big news on the stock since earnings a few weeks ago. However, PEIX stock keeps moving higher. Why is PEIX going up?

Thanks for asking. There are a few main drivers here.

First, when compared to its closest matching company in the same industry, Green Plains Renewable Energy (GPRE), Pacific Ethanol is GREATLY undervalued. GPRE is trading above $40 a share and PEIX should be much closer to this. Although GPRE has a much larger output of ethanol PEIX sees big advantages over GPRE due to their location of plants being near where they sell their ethanol; cutting significantly into their cost of goods sold. Many believe these companies should be trading in the same range and GPRE is not moving downward any time soon, so PEIX must go up.

This brings us to our second point, Institutional Investment. Large institutional investors are quickly catching on that this is a company with a very nice growth opportunity due to low corn prices, good ethanol prices and the pay down of most of Pacific Ethanol's debt. If you look through the volume of the stock you'll notice there are decent size buy orders coming in for 30,000 and 15,000 shares at a time multiple times a day. The institutions know that if they buy too much too quickly the price will swing, much like this stock used to do prior to the institutional investment in it.

So day after day, the big boys are adding. Companies like Black Rock, Credit Suisse, and Vangard know they can't load up all at once because that would cause a spike and they would drive the price up too fast. It's better for them to add in 15k and 30k chunks over weeks instead of all at once. Look back through the volume and you can see these large chunks being bought all throughout the day.

52 Week High - just the beginning

Steady Growth a HUGE positive for PEIX's future

Pacific Ethanol's stock chart shows more steady growth.

Today Pacific Ethanol hit a 52 week high and saw a close of over $20 for the first time since early 2012. But the best part about this stock is it's healthy growth chart. This stock has been wildly unpredictable in the past but since November of 2013 it's been the simplest 6 month chart to read I've seen (minus a fair market value adjustment for quarter 1 that saw a big swing).

What does this tell us about the stock? For all its unpredictability, since November it's mostly followed corn prices and ethanol prices. Corn has steadily gotten cheaper and Ethanol's demand has grown. It doesn't take a rocket scientist to recognize that if you pay less for your corn and the price you can sell your product at continues to improve, you're going to make more money on each gallon of Ethanol.

Today it was announced that corn production just had a record crop of 14,000,000,000 bushels. You can bet that the 3rd Quarter for Pacific Ethanol is going to be a blow-out. Especially since they've eaten up the additional start-up costs of the Madera plant in Q2 and Q3 is now humming at full steam.

I don't expect this chart to slow down anytime soon and in 6 months we should be looking at mid 30's for the stock price.

The crazy swings will likely not come back that we saw in late 2011. This has a lot to do with institutional investment increasing and many of the variables that could wildly affect the price of the stock have disappeared. The main ones are the debt that's been paid off, the idled plants that are now all at full capacity, the price of corn and uncertainty, and many other complications that the management has worked hard on to remove. We're watching a company stabilize right before our eyes and the chart reflects that. Expect more solid growth into the future!

PEIX above $19 - a new floor?

Now that Pacific Ethanol has broke the $19 barrier, this is a fantastic sign. If it can close above the $19 barrier today it's likely going to put that in as the new floor moving forward into the 20's range.

It's held steady in the $19.00 to $19.15 range which is a great sign of resistance for it to move below $19. Now that we can see it holding and there's support to move forward, if you haven't got in yet, maybe now's the time.

Pacific Ethanol Quarter 2 earnings reports

Earnings were released last night and it's amazing to me still how many people are trading on headlines and not digging into the data.

As suspected, the data was fantastic. But what's comical is the initial headline of PEIX misses analyst's estimates by 6 cents. This company is hilariously under-covered by analysts and they pulled out some random analyst that dart-boarded a number for PEIX (and actually got pretty close) but since it was a slight miss, they're being heavily penalized.

Right now the stock is starting to rebound as the investors are digging in and seeing the fundamentals of the company are incredibly strong. Watch today and the next week to see it break through the $19 range and hopefully into the $20's in the next month.

Earnings post today after hours - PEIX

Today is the moment of truth for PEIX. And it shows all over the stock. The price is swinging wildly as people who have been holding are getting scared and selling, stock shorters are trying to cover and the rest of us are tired of the "keep waiting" attitude.

Yesterday's Seeking Alpha article was fantastic in explaining the future of this stock and what levels its price should be at over the next year. The question on all of our minds is "How quick will it get there?"

When will PEIX become a $30 stock? It could be as soon as tomorrow, although, if it hits that it'll likely drop back down as that's a target I believe many of the traders have of where they'd like to sell.

Pacific Ethanol will likely jump to $25 once the market opens and then I think it'll come back to $20 after a bunch of sells with people taking profits. Then over the next week, I think it will quickly climb up to the $30 range. In 3 months, look for it to get around $40. It will close the gap with GPRE and both should enjoy this stock price through next year.

Let the fun begin! Get in now if you haven't yet. Don't make the mistake of thinking it's already done all it's run up. The big run is coming. It's coming starting tomorrow.

Great PEIX stock price on Seaking Alpha

Fantastic article on the future of this stock. Somewhere in the $30's!

http://seekingalpha.com/article/2354415-value-gaps-of-all-value-gaps-a-tale-of-2-ethanol-companies

Enjoy!
Nick

PEIX Options - why you should watch them

PEIX Options can be a Good Indicator of Investor Stock Price Sentiment

Even if you know nothing about stock options, you should watch them. They are a very good indicator of where people expect the price to go to and can be a good tool to understand the real sentiment of a stock versus what you may see on the message board from people "pumping" or "bashing" a stock for their own gains. For example, you can see 1843 contracts are still open (open interest) for the $21 option chain. Each contract represents the ability to purchase 100 shares at $21 before August 16th. That's a total of potentially 184,300 shares. The average price people have paid to buy those rights is hard to tell exactly, but the majority look to have been purchased at $0.55 per share. That's roughly $101,000 spent from investors to buy the rights to sell the stock at $21. That means if it never hits $21, there will be a lot of investors who will be out a total of $101k. 

What I really like about Options is it's not opinion with nothing behind it. It's putting your money where your mouth is. 101k is on the line for those people who think the stock price will go above $21 before August 16th. What else I like is you can see the volume on Options. There are some PRETTY BIG investors buying thousands of contracts at 21 at a time. That means there are some "big boys" who see where this stock is going and plan to cash in HUGE. For $21 to make sense, the stock price needs to really be above $21.55 for them to even break even. This is because they paid 55 cents a share just to buy the option, so to make money on them, they need to be able to sell them for more. I like to sell options for at least $4 to $5 more. So this tells us there are a LOT of people who were willing to put there money where there mouth is and say $21/share will hit soon and even higher. So much so, they're staking $101,000. Now that's some useful information to watch. Much better than these message boarder's who post non-sense all day long. (I'm looking at you, Ray on Yahoo's board).

Nick

When Will Quarter 2 Earnings for Pacific Ethanol (PEIX) come out?

What E*Trade estimates...is wrong.

PEIX Q2 Earnings Release

Day over day, E*Trade updates their estimated earnings release date. Initially they had it as July 21st, then that passed and they moved it to the next day, then the next. Each day now they're saying earnings are coming in after hours today. This is false.

This is also another good example of bad information influencing traders.

So when will Pacific Ethanol's Quarter 2 report be released?

Pacific Ethanol always puts out a press release a few days prior to earnings and will do the same this time as well. Expect the press release to come any day now and earnings to show up around August 7th. This date is an interesting one for many reasons.

The major reason this date is interesting is for the Options traders (you can type "traders" all with your left hand...). The nearest options chains expire/exercise August 16th. That only gives about six trading days for the stock to run up and for options traders to make a good profit. This is why options traders right now are watching this stock very closely. It's better for options traders if earnings come out earlier rather than later as they'll have a much better chance for the option to come into the money (where the stock price is higher than the option's strike price). I personally have options out on this stock for $20 and $21. Initially, I was hoping for an earlier release date to give time for those options to run up. Now, the options traders will need to be on their game. See my next post as to why you should be watching the options chains.

Nick

Pacific Ethanol - PEIX earnings report is due next week. Moment of truth!

Pacific Ethanol (PEIX) earnings report is due next week. 

This is the MOMENT OF TRUTH!

From here forward the stock price for Pacific Ethanol will likely not look back and be at these levels for years to come. If earnings come out Monday morning July 21st this stock should see a nice bump in price.

But what's happening now and how high is it likely to go? With PEIX likely to hit 1 billion in revenue thanks to incredible circumstances of low corn prices, high ethanol prices, and excellent internal metrics in place to reap large profits, the stock is seriously undervalued. But the value of the stock is not the only factor of where the price will go.

"Why is that," you may ask? The sentiment of the stock has changed dramatically since the last earnings report fiasco. To catch those who aren't aware of the circumstances last quarter, here's what happened.

Pacific Ethanol was doing everything right and also reaping the benefit from a very good corn crop and favorable prices on Ethanol. They paid off debt which saved them millions, re-opened their final Madera plant which added 20 million in production. More recently they were added to the Russell 2000, 3000, and Global indexes, have seen institutional investment skyrocket, added Wet Distiller's Grain as a bi-product they sell, as well as many other positives which all have caused the stock price to spike from Q4 to Q1 earlier this year.

But that's not the whole story. Pacific Ethanol had quite a few warrants outstanding which are just shares they have promised to sell based on a set price. Whenever a stock price jumps significantly GAAP accounting principles require what's known as a Fair Market Value adjustment to be made to these outstanding warrants. Since the price of the stock jumped so much (over $10 per share) Pacific Ethanol had to show a loss of over $10 per share for each share. This is what's known as a non-cash expense. And it doesn't at all tell the whole story as there was no money lost. Quite the contrary, their accounts had never been fuller. But due to this GAAP accounting principle, the Earnings Per Share (EPS) were made to look like a HUGE loss had occurred instead of the giant gain they had seen. The stock tumbled from the mid 15's to the 10 dollar range on the initial reports due to most investors only looking at the EPS reports of a huge loss and not looking deeper into the financials to see that this was the best quarter they've posted in 5 plus years.

Fast forward to today. This quarter has been as good or better than the last, however, we do not have a fair market adjustment that will significantly hit the books as the stock price was relatively the same at the end of
Q2 as it was for Q1. This means the turn around should be gigantic from what we saw last quarter.

But this doesn't answer where we're going. Their is more to consider. Since the stock price collapse after Q1 earnings, people have been educated on the warrants issue and the non-cash expense and now understand this was not the whole story with the company. Due to this education, the stock price has rebounded and is threatening its 52 week high. 

The question is, have enough investors figured out the truth about the stock and has that already baked into the current price, OR are people still in the "wait and see" mode and want to make sure earnings are as predicted before they buy in for the ride up to $40 per share.

Certainly, the word has spread - the loss from last quarter was not an accurate depiction of the company's success recently. But has this message spread to most of the stock holders or just a few well informed ones? If it's most of the people, then we may not see a giant rise on the earnings next week as they've already bought on the knowledge. I however, suspect it's more likely we will see a large rise in the price. I think we're likely to hit a price as high as $30. I think the $25 to $30 range next week is not out of the question.

I'm honestly hoping for a lot more. This next week will be one of the most interesting weeks for this company since Bill Gates was one of the early investors.

Nick

Pacific Ethanol JUMPS 8.29% on zero news - Why you ask? (PEIX)

PEIX for July 14th, 2014

Well, today we see another HUGE jump prior to Quarter 2 earnings coming out on July 21st, 2014.

What happened today for Pacific Ethanol? Why the big jump for Peix?

Likely what we're seeing is two fold.

1. Traders are getting in before the BIG jump up that's set to occur on the 21st when the quarter one earnings report comes out.

2. July 19th is the Options strike date for this month and the last day to trade the option and cover your sell options is Friday, so there may be some attempt to drive up this price so people can cover their sells.

Likely though, most of this action is due to #1. The average trade volume was closer to 500,000 for the last 10 days and now that we're a week away from earnings expect to see heavy trading like today. Today's volume was four times more than the average. That's a LOT of people trying to get in before the earnings report because the smart money is on this stock going way up.

What is PEIX worth? Where is the stock going in the near and long term?

Short-term, expect PEIX to jump to the $25 to $30 range in the couple of days after earnings report on the 21st. Then we expect to see a pull back going as low as the $20 range due to most people taking their earnings.

Once it stops the bleeding in the low 20's range, people will buy back in and Pacific Ethanol should be to $40 stock price range in 4 to 6 months.

I'll be selling somewhere around $30 and buying back in at $20, then selling again at $40.

Pacific Ethanol's early rise and dips - PEIX

It seems like a trend that every morning Pacific Ethanol is rising sharply, then falling, often times to level off for the rest of the trading day. Here are some of my thoughts on what may be causing this. Our expert writer will also weigh in on this one likely later.

Now that the institutional investors are in this stock, the fund manager's job is to get a decent return. So often times on an early price spike, they'll sell and take their profits. They're happy to take a 1 or 2% gain first thing in the AM. This often pushes the price lower and they can hop right back in on the dip, and likely do.

Then they repeat this the next day.

PEIX - What's happening with Pacific Ethanol stock today

Disclaimer - As always, this is just my opinion on a stock.

Likely what is happening today is we are seeing the traders who were planning on dumping at $16 getting scared. These are the retail investors who don't understand that in a couple of weeks this stock is likely to have the single biggest stock jump it's seen this year.

As trading opened today, I think many of the people hoping to sell and get out at $16 saw the stock started tumbling (for no good reason btw) and decided they better take what they could get before it dropped to nothing.

What they don't realize are all the positives working towards a $30 stock price and are going purely on charts and not company data.

Here's a short list of some items to keep in mind:

1. Q2 Earnings report comes out at the end of July. Unlike the prior earnings report that appeared to be a loss due to a "non-cash" adjustment of outstanding warrants, this earnings report will not show that (fake) loss that scared so many away.
2. Madera plant has now been open and in full swing for the WHOLE quarter. 
3. Corn prices continue to be favorable.
4. Pacific Ethanol continues to pay down and refinance other debt into better terms, saving millions in interest. 
5. Based on other indicators like PE Ratio, etc, this stock price belongs in the $30 range and is very undervalued.
6. PEIX was added to many of the Russell indexes. This means any fund that uses those Russell indexes will require owning a percentage of this in their portfolio.
7. Institutional investors continue to gobble up more and more market share of Pacific Ethanol.

There are absolutely zero reasons why this stock would go down right now, so days like today tell me one of two things:

1. I don't know something I should know.

2. Or, people don't know some things they should know (listed above).

Hopefully this will help clear some of that up.