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Crunching the Fracking Numbers

NEW YORK (TheStreet) -- Investing in companies that produce fuels from the process known as fracking or from the manufacturing of components that allow engines to be powered by these fuels accelerated with the stock market bottom of March 2009. This process has slowed since March 2012, but appears ready for a resurgence this year.

My interest in this subject began from a recent presentation by Mike Jackson, chairman and CEO of AutoNation (AN), at the 2014 University of Tampa Fellows Forum. After hearing his presentation and reading comments from industry experts I think the industries producing natural gas from fracking and building engine components that allow heavy-duty trucks to be powered by these fuels needs a second look by investors.

Clean Energy Fuels (CLNE) ($9.48, down 26.4% YTD) is building fueling stations around the nation to provide both compressed natural gas (CNG) and liquefied natural gas (LNG) and delivers these fuels directly to trucking companies, airport shuttles, taxi services, trash collectors and public transportation facilities.

The company expects cities across the country to make the switch to service vehicles fueled by CNG to save fuel costs and clean the air. Natural gas can cost up to $1.50 less per gallon than gasoline or diesel, and, according to the company, "reduces greenhouse gas emissions up to 30% in light-duty vehicles and 23% in medium to heavy-duty vehicles." Note that nearly all natural gas consumed in North America is produced domestically.

Clean Energy reported quarterly earnings report on Feb. 27 and missed analysts' estimates of earnings per share by 4 cents for a loss of 31 cents a share. The company also announced that gallons of fuel delivered rose 13% during the fourth quarter of 2013.

The stock has had a volatile trading pattern since bottoming at $3.23 in November 2008. The hype of the expanded use of natural gas to power vehicles resulted in a strong rally to $23.70 in April 2010. Delays in the process resulted in a downward move to $9.02 in October 2011. Renewed speculation fueled a rebound to an all-time intraday high at $24.75 in March 2012. Looking at the weekly chart this spike higher looks like a parabolic bubble that popped and the stock has been below its 200-week simple moving average since October 2012 with this average now at $13.81.

Prompting investor interest is the 2014 decline to as low as $8.27 on Feb. 28 in reaction to the earnings miss. Our 'Crunching the Numbers' table shows that the stock is below all five moving averages. The weekly chart is negative but oversold with its five-week modified moving average at $10.13. My weekly value level is $8.21 with a monthly pivot at $9.84 and semiannual risky level at $11.55 which is the first upside target on a weekly close above the five-week MMA. A higher semiannual risky level is $18.91.

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