For several years, news in the energy storage sector has been dominated by happy talk stories about lithium-ion batteries that over-hyped performance and fueled flights of imaginative fancy while downplaying technical limitations, system costs and safety risks. The relentless hype resulted in nosebleed market valuations for several lithium-ion battery developers that collapsed like a house of cards when the economics of using $1,000 bottles to store a $0.10 commodity became self-evident.
At its peak, the lithium-ion hype was just a hair shy of "Silver Bullets" and "One Ring to rule them all." A predictable but subtle collateral impact was an increasingly bearish outlook for all energy storage technologies that weren't lithium. It was yet another proof of Newton's Third Law of Markets - for every hype there is an equal and opposite anti-hype.
Now that lithium hype has self-immolated in a toxic stew of persistently high costs, serial failures to achieve aggressive performance goals and increasingly obvious product safety issues, I'm seeing signs of a profound shift in market perception where the anti-hype is rapidly fading and manufacturers of cost effective energy storage products are turning the corner en masse, presaging a long and sustained uptrend.
Just as I predicted, cheap is beating the dickens out of cool at every turn because the law of economic gravity is both immutable and irresistible. The green in customers' wallets is far more important than the green in their conversations.
While I don't claim any particular expertise in technical stock chart analysis, I do know that reversal points where short-term moving averages move up or down through long-term moving averages are reliable indicators of the direction a particular stock is heading.
The two most widely known reversal points are the bullish "golden cross," where the 50-day moving average moves up through the 200-day average, and the bearish "death cross," where the 50-day moving average moves down through the 200-day average.
Over the last month, I've watched a remarkable synchronicity develop across the entire energy storage sector. The pattern isn't isolated to one or two stocks. Instead, the moving average crossovers are flashing green across the board for all domestic manufacturers of cheap energy storage solutions.
The following graphs track the 10-, 20-, 50- and 200-day volume weighted moving average prices for eight energy storage companies over the last eighteen months. Each of the eight companies has either formed a golden cross in the last month or is rapidly approaching a golden cross.
In each set of graphs, the downward curving red arrows highlight a death cross where the short-term averages fell through the long term average and the upward curving green arrows highlight a golden cross where the short-term averages climbed through the long term average.
My first pair of graphs shows the short- and long-term moving average prices for Enersys (ENS) and Johnson Controls (JCI). While these two companies didn't suffer the same kind of brutal price declines that many stocks in the energy storage sector had to endure, my tracking charts show that both completed a golden cross this month when their 50-day average moved up through the 200-day average.
My second pair of graphs shows the performance of Exide Technologies (XIDE) and ZBB Energy (ZBB). While both companies lost more than half of their market value over the last eighteen months, my tracking charts show that Exide formed a golden cross this month and ZBB is likely to form a golden cross within the next few weeks.
My third pair of graphs shows the performance of Active Power (ACPW) and Axion Power International (AXPW.OB). While both companies lost roughly two-thirds of their market value over the last eighteen months, my tracking charts show that both will form a golden cross within a couple weeks.
My final pair of graphs shows the performance of Maxwell Technologies (MXWL) and Ultralife (ULBI). While both companies lost about half of their market value over the last eighteen months, my tracking charts show that both have a good chance of forming a golden cross over the next month or so.
The differences between the eight companies I've mentioned in this article are huge because they range from diversified giants like JCI to transition stage nano-caps like Axion and ZBB. The following table provides summary financial and performance data for all eight.
Since I've never seen a situation where the graphs for every company in a sector were acting like a synchronized swimming team and making the same bullish transition at the same time, it's difficult to predict the length or strength of the next leg with any degree of confidence. If we are in fact seeing a natural market response to the self-immolation of lithium anti-hype, energy storage will be a fun sector to write about over the next year or two.
Disclosure: I am long AXPW.OB.
Additional disclosure: I served as a director of Axion Power International (AXPW.OB) from 2003 through January 2007.