Truth be told, had MagneGas Corporation (NASDAQ:MNGA) shares not surged 400% - and subsequently tumbled - in early January, it might not even be worth looking at now. MNGA did surge then, however, so what we've seen unfurl over the past few days can't be ignored now... as it suggests this small hydrogen supplier stock is about to take flight in a more controlled and longer-lasting way than it did at the beginning of the year.
Don't sweat it if you haven't heard of it; most people haven't. With a market cap of only $20.8 million, MNGA doesn't turn a lot of heads. Nevertheless, it's worth a look, if only because what MagneGas does is so unique.
In the budding era of alternative fuel sources, no stone has gone unturned. Indeed, it's almost as if we're already looking for alternatives to the alternatives. The end result of that progressive thinking has been the advent of pure hydrogen as a means to do a variety of things ranging from improving the combustion of diesel engines, generate electricity within fuel cells, to plain old burning it for heat. MagneGas primarily does the latter of those three uses of hydrogen, bottling hydrogen up and selling it to metalworkers in canister form as an alternative to the acetylene traditionally used in welding torches. It's also wading deeper into waste-management waters; "cooking" liquid waste breaks it down into a safer, basis form, which can then be disposed of.
While hydrogen's potential uses have grown in just the past handful of years, there still aren't many suppliers. That's good news for MagneGas Corporation, and by extension, it's good news for MNGA shareholders. It's not the compelling part of the stock's story here, however. No, what makes MagneGas worth a speculative swing at this point is far simpler...the chart has confirmed it wants to forge higher now.
The big clue to that end is the way shares have inched their way back above all their key moving average lines after a pretty big setback in the latter part of January. It would have been very easy for MNGA fans to assume the worst after failing to make good on the breakout effort earlier in that month, but the interest in the stock never really went away. The bulls just needed to regroup, and they did, pushing shares back above ALL of its key lines as of Tuesday and today. Even more telling is how the short-term moving average lines have crossed above the longer-term moving average lines, confirming at least the short-term trend has shifted in a bullish direction.
To fully appreciate just how much the market wants to turn MagneGas Corporation around, however, one has to take a step back and look at the weekly chart. It's here we can see two key things: (1) there's noticeably higher volume behind the bullish efforts, and (2) we just made a higher key low... for the first time in years. It's also possible (though admittedly a little fuzzier) that MNGA is finally finding support at some of its key moving averages, which it used as a springboard for this week's budding rally effort.
Bottom line? While still a tad risky, the potential reward here may well merit the risk... especially if we see a move above yesterday's high of $0.94.
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