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.