Edit: Added PT, timeline, and charts thanks to feedback from u/OryxDaMadGod
First post here. I've been following NFE for about 4 months when I wondered why a growth stock was trading so low (it's the debt - always the debt). I think there's something up next week and I wanted to share my analysis to see what others think. Note: I think it's a great long term play (I'm a value investor) even if this doesn't play out.
**Thesis**: The volume needed to drive a breakout from a cup and handle pattern will be triggered by options activity next week.
**PT**: $19-20 long term but some expectation that it will massively overshoot this short term (see discussion below)
My strikes sit from $12-15 over the next 5 weeks. I didn't do lots of math to calculate. The volume on options is low so I just looked for strikes that seemed like good deals (e.g. $15 1/17 strikes would go from 35c to 65c on only a 30c underlying price movement so when they pulled back, I bought).
**Timeline**: I think this will take place over the next week but because some of the TA is on the 5 year chart, my strikes go from now into the middle of January.
**The technicals** (note, all options data is for 12/20 which is a major expiration date for this stock):
1. We're 1 week into the handle of a cup and handle pattern
Volume has been decreasing in the handle. (sorry chart not too fancy)
[volume for the last week of NFE](https://preview.redd.it/mc3w02zem17e1.png?width=1543&format=png&auto=webp&s=d1f8ec5e0fe16eca62c2e84d1915ffbb22113f7f)
[cup and handle pattern for NFE](https://preview.redd.it/pn0znincn17e1.png?width=1552&format=png&auto=webp&s=98d2f52dc88b9326ad2f140b51d2d1098856f9a5)
2. There are 10k ITM Calls, 58k OTM Puts (average daily volume \~5m so the 1 million shares the ITM calls represent is significant)
Sidebar: I notice that when a large amount of Puts are ITM it causes the stock to slide on expiration day and vice versa when a large number of Calls are ITM. This effect centers around the highest OI amounts (maybe there's a name for it, idk - it's not the same as max pain)
3. The largest block of OTM Puts sit below the resistance line ($12) with a fair number of Calls around that strike sitting ITM
4. The largest OI Call is at $19 - which just happens to line up with the cup and handle formula of "rim - bottom + resistance": Approximately 13.5-7.8 + 13.5 = 19.2
That call was opened on 10/25 and coincides with the bottom of the cup AND news that FLNG1 had completed its 3rd run (1st run doesn't matter - 3rd run shows "It works").
This could have been a hedge for a short seller or someone who thought "hey, if it retakes the former bottom resistance, then I want to own the shares". I have no idea. I just find it interesting. It could serve as resistance or support depending on what the buyer is thinking.
https://preview.redd.it/ghk6t44zs17e1.png?width=302&format=png&auto=webp&s=3cbd2de384aea1dd80c5937861c56a78f06bb9f7
5. SI is 36.2m shares or almost 32% of the float and daily volume is \~5m
6. The PUT interest for strikes from 10.5-11.5 went up for 12/20 at the same time as the price did and proportionally to the volume increase. This indicates that we have a new buyer hedging in case the price doesn't move the direction they want in the short term. But it also means we have a secondary bullish whale who is willing to support this move by writing the PUTs.
Not advice - but anyone can make this trade. As you buy shares, buy PUTs so if the price does fall, you don't lose as much.
[PUT interest increase](https://preview.redd.it/7mp4ca3dk17e1.png?width=300&format=png&auto=webp&s=d2b3fd2d23ee43eb20b2aaf5392a64ac6303e8ed)
7. The 5 year chart shows head and shoulders (which is bearish) but I think the cup and handle reverses that trend. It also says something fascinating about support.
**The low of 5 years ago was the low of last month.**
**The current price point is almost the same as the breakout price point from 5 years ago.**
**My PT aligns with previous supports over the last 5 years.**
[previous support level matches PT](https://preview.redd.it/24plvpppo17e1.png?width=1046&format=png&auto=webp&s=108af57109ab6fed5f01382860ae57dbe2a7bf26)
**The non-technicals:**
1. NFE tanked because of a huge Q2 miss (project delays) and debt concerns. Q3 is back on track.
Conspiracy theory time... That "miss" allowed the CEO to invest $50mil at almost the bottom of the cup. There's a lot of correlation/causation arguments to make here, but all I'm saying is, this is how the rich get richer.
*Note of caution: I think there is a lawsuit related to this.*
2. There's been a confluence of good news in the last week. *Note: These could be reasons for the right side of the cup forming and without further catalyst, the handle might collapse.*
\- They've completed all the debt refinancing that they said they would (pushed it to 2029).
\- They announced a new 10 year charter with EGAS
\- Bloomberg wrote that they're in talks to sell a few assets that could be worth 1-2 billion
\- There is supposed to be a 500mil payment from FEMA related to a broken contract. I'm not optimistic on it but if it does happen, it's a catalyst
3. NFE makes money - a lot of it. At the base of the cup, the P/S was \~1. I know this isn't a valid metric for their industry but I find it interesting. They have been burning a lot on CapEx.
*Tangent: The last time I invested in a company that the markets hated because of CapEx was Facebook at $90. I feel like markets overreact to CapEx.*
4. The industry has a PE ratio average of 30. While it's hard to predict NFE's future earnings, even at a conservative $1/share for 2025, you'd be looking at $30. I think that average PE seems high (again, value investor here) but I could justify a 20 ratio given the growth nature which puts us right back at the \~19 target.
[https://stockanalysis.com/stocks/industry/utilities-regulated-gas/](https://stockanalysis.com/stocks/industry/utilities-regulated-gas/)
5. The biz is kind of cool - they own the entire supply chain for producing electricity from natural gas (it's not great, but better than coal) and use that to supply countries that have electricity deficiencies with power.