RINO International Corporation is in the business of environmental remediation, or to more simply put it they make technologies to clean up the environment.  If you have a green focus then this company might be a good bet.  RINO is based in China and caters to the Chinese market.  Their two main specialties include industrial water purification and industrial desulphurization focused on China’s steel industry.  One good thing about this industry can be taken from one of their SEC filings:

“Our business is driven more by policy, environmental regulations which are mandating steel manufacturers to install these systems – THEY DON’T HAVE A CHOICE AND THE FINES FOR NOT COMPLYING ARE INCREASING

While this sounds nice several ratings agencies have labeled RINO a SELL.  Before stepping in we need to look at what is going on.  We can start by looking at past history to see if there is a pattern we can use for guidance.  By bringing up the 1 yr chart we can look for support and resistance points.  Over the past month we can see support at the $12 and $11 levels (the lower yellow lines). Previously in August it bounced off $11 support.  Looking back to September 8 we can see that support at $12 held and there was a price bounce.  In late September there was a large price move and the stock moved up at a rapid pace.  Looking at today’s pattern we can see similar behavior and a bull triangle forming.

Bull Put Spread

Buy Aug 10 10.00 Put @.32
Sell Aug 10 11.00 Put @ .50
Credit (Mid): 0.18
Amount at Risk: 0.83
Potential Return: 0.18
Potential % Return: 21%
Break Even: 10.83

Or if you are feeling more aggressive you can go for a combo.  The disadvantage is if the stock drops below $11 by August expiration you agree to buy it for $11 by selling the Put option, no matter how low it goes.  But after looking at the charts it seems unlikely that the stock will break down through support at $12 and at $11.

Combo Risk Reversal
Buy Aug 10 14.00 Call @1.05
Sell Aug 10 11.00 Put @ .45
Debit : 0.65
Amount at Risk: 0.65
Delta: 0.55
Potential % Return: Theoretically Unlimited.  85% (for $1 move up in underlying)

Or for something plain and boring you could buy the stock today for about $14 and ride it up to the next resistance point of $15.

RINO’s services are going to be in strong demand in China.  Until we see where the economy is going, this is something to trade in and out of, or limit your exposure through the use of options.

We’re revisiting an old favorite today, LDK Solar Co. Ltd (NYSE:LDK).  This is a Chinese Green Energy play that we like to throw on occasionally.  As much as we love green energy it isn’t something you can put your money into and forget it.  Last month the solar sector was among the bottom on Tickerspy.  This is one area where you need entry and exit strategies.

We’re seeing some positive technical signs:

• Higher highs and higher lows have been happening for four days.
• Person’s Proprietary System (PPS) is showing a buy
• PPS shows a positive cross over after the buy signal
• MACD Histogram progresses back to and above zero
• Stochastics have crossed over into positive and have not gone negative
• Stock did not break down below pivot point of $6.93

Our short term strategy was to do a covered call.  In simple terms you buy some stock and then sell a contract to sell the stock to someone else at a later date.  We managed to get in at $6.94 per share and sold a March 7.5 CALL for $.40.  We get paid $.40 per share for agreeing to sell the stock to someone else if it reaches $7.50 by March 19.  If the stock keeps going up we miss out because we will have to sell it at $7.50.

There’s a 63% chance that it will not get to $7.50 so we can put on another covered call next month if things go our way.

If it stays under $7.50 we get to keep the $.40 which reduces our risk to $6.54 per share.  We won’t lose any money unless the stock drops below $6.54.  There appears to be some resistance around $7.12, but if that breaks it should be a relatively smooth ride up to $7.50.  We have a Sell Stop in place at 6.74 which still nets us $.20 per share if the trade moves against us.

Without the covered call this trade might not be worth the risk.  Using covered calls can be a good strategy to reduce your risk if you know that you want out of a stock by a certain date or price.

Over the past few days Green Energy has taken a beating on the market.  There are some signs of a turnaround though it is not certain.  Using the PPS, MACD Histogram, and Slow Stochastic it appears a few stocks have started to turn around.

YGE Day Chart

Yingli Green Energy is showing a positive crossover on the Stochastic,  the MACD is improving day after day,  and the PPS is also having a positive crossover.

OPTT Day Chart

Ocean Power Technologies is showing a positive crossover on the Stochastic,  the MACD is improving day after day,  and the PPS is leaning towards a positive crossover.

FSLR Day Chart

First Solar is is showing a positive crossover on the Stochastic. The MACD is improving day after day.  The PPS is also having a positive crossover and is signaling a buy indicator.

AONE Day Chart

Battery Maker A123 Systems is showing a positive crossover on the Stochastic.  The MACD is improving day after day after a flat decline.  The PPS is almost having a positive crossover and the buy indicator has triggered.

We tried a play on LDK Solar last month.  We tried to go long by selling puts at $7.  That would have been a good strategy for about a month as this was not a buy and hold stock.  The guys over at Greenstocks Central reported yesterday that the CEO is trying to come up with a new strategy for funding.

the CEO stated in an SEC filing, “If we do not successfully execute our liquidity plan, we face the risk of not being able to continue as a going concern.”

LDK Solar has dropped from over $9 to under $7 in the past two days.  This is a perfect example of why managing your sell stops is important.  Looking back at the chart some well placed trailing stops would have exited the position on Nov 24.  There was also a strong jump up on Dec 4 where setting a stop at $8.50 would have saved some profits.  The slow stochastic is showing an uptick in the %K line, but this may continue to sell down. 

Rentech, Inc (NYSE: RTK) announced revenue of $24.7 million compared to $74.6 million for the prior year.  This is a net income for the year of $3 million or $0.02/share.  Not too bad, but the street was not amused.  We entered a trade on this one at $1.54 at the end of November. Today we were stopped out at $1.59.

Rentech is a clean energy company that has been around for a very long time . They’re testing some interesting technology and seem to have a fairly repeatable process.  We’re still undecided about getting back in.  The debt-to-equity ratio is a little high but this still might be a good short term play with a tight sell stop.  There is support near 1.44 and 1.38 which might prove to be a good entry point in the future.  It’s also still above its 21 day SMA which is a good sign for now.

RTK

Cleantech has been on a roll lately.  Venture capital in the sector is up 46% to $965 Million.  The US Department of Energy announced $3.4 Billion in grants for smart-grid programs.  There are also $2.4 Billion in grants for plug-in electric-vehicle battery manufacturing.  One would think that this is absolutely great for green.

A123 Systems and Detroit Edison managed to land $5 Million for battery research.  There was quite a jump up in price from $14.97 all the way to $17.49 at its highest.

The Cleantech revolution has left some out in the cold.  Evergreen Solar recently got beat down prior to earnings and is going to shut down their manufacturing facilities in Massachusetts.  Guess where the new jobs will be located?  China.  Nevermind the fact that they received $58 million from the state taxpayers, and a portion of that was funded by the bail out–I mean Economic Stimulus Plan.

Green has a different ROI than IT.  Some are predicting 15-18 years to get a return, while IT is geared to provide a return in 5-7 years.  What we are seeing is a trend to invest in IT driven green initiatives such as the smart grid or to get into other green investments later in the life of the company.   Solar manufacturing is suffering right now because of an over supply with low demand.  If you’re starting a green energy company the safest place to find funding will be in software that contributes to the green economy.

LDK Solar had a nice bump up 20% today.  They have plans to sell a 15% ownership stake in its 15,000 metric ton (MT) annualized capacity polysilicon plant in Xinyu City.  China. Jiangxi International Trust and Investment Co., Ltd. has agreed to purchase this interest for approximately RMB1.5 billion (equivalent to approximately US$219 million).  The cash infusion was one factor that seemed to help their stock price for the day.  There were several entry opportunities for a day trade as this only kept going up today.  Instead of buying LONG I decided to sell several $7 PUT options hoping to enter on the lunch time pull back, but LDK kept going up.  Options expire in 2 days so this play wasn’t the best, but there’s no downside in it which is what we’re looking for.