PET (ASX) Lets Talk Potential

Originally posted by Inchiquin: ↑

(I inadvertently included a link to an old blog in one of the graphics in my last post and so I requested for it be removed. Sorry for any inconvenience, I'll repost below.)

On the topic of charts, over the weekend I was looking at the chart of another stock, Clean Teq, which is also involved in the water treatment space.

Looking at the CLQ chart below, notice the level at which this stock peaked in late 2017?.

$1.545- the same all-time high that the Phoslock share price hit earlier this month. After hitting that high, the CLQ share price plunged, and the last time I checked it was hovering around the $0.36 mark.

It makes me wonder if some of the momentum traders who bought into PET recently had previously been burnt with CLQ, and may have been spooked when the PET share price hit the 'magic number' of $1.54, thus taking it as a signal to bail out.

If so, perhaps more a reason for optimism, as superstition probably isn't the best grounds for selling a stock.

Although Phoslock is invariably going to be compared to other stocks in the water treatment space such as Cleanteq and Fluence, I don't think the comparison is really exact, and my belief is that Phoslock has a specific tailwind driving its growth.

In my opinion, a significant macro trend has played a part the growth in Phoslock over recent years, namely the worsening problem with harmful algae blooms around the world. This seems to be growing at an exponential rate with each decade that passes.

It is hard to get concrete data on this, but recently I stumbled across a US-based environmental website called EWG which just last week included an interesting video on its website, showing the growth in the number of algal blooms in the United States between 2010 and 2019.

The video showing the gradually worsening extent of the problem across the US can be viewed here.

One caveat that should be borne in mind here is that the locations of the algae blooms highlighted on the maps in the video were sourced from media reports, and thus you can't rule out the possibility that the increasing frequency of blooms might be down to increased media interest in the subject matter.

That said, I doubt that increasing media interest is the sole reason behind the increase in the reports, as there is enough evidence from other sources to suggest that algae blooms have become significantly worse over the past decade, and not just in the US. Partly this is due to increasing population densities around water bodies, but it is likely that global warming is the primary culprit.

Expand

Well the traders might have been spooked last week but we are going to close on a new high just shy of that 1.50 mark. Too much fund buying I'm guessing. New closing high today (by a comfortable margin and good volume), corrections short and sweet, new rally higher confirmed. I expect that 1.54 will be passed this week.

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Lets Talk Potential, page-106

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Lets Talk Potential, page-106

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