Traders vs. Investors

We've tried to think through who's buying right now and who's selling and we believe the traders are in control of the recent price action. Here's why.

1) Sharp up moves followed by slow declines have been the recent pattern, and there is a lot of juice in the options.

2) We believe momentum players and qunats have bid the stock up and then tried to slowly unwind their positions or are having stop losses trigger if they bought at the wrong part of the up cycle.

3) Option traders that have covered calls (note the high open interest in the Sept 15 calls) may be selling the underlying when it drops below 15 and putting in a program trade to unwind the call if the stock rises. This would be done to lock in an existing profit in the trade and get the benefit of the cash from selling the underlying.

4) Investors have no real news to alter their risk/reward views. The last quarter's earnings inspired some aggressive investors to come in, but it's clear that the September quarter will really be the pivotal one (full quarter of PJM revenues, should be cash positive, etc). So the brave investors have already taken a position, and are in a wait and see mode before increasing that position. Other investors may be waiting for the June (but probably the September quarter) to sound the all clear signal.

Net net: if you believe in the business model, and are comfortable with the risks that the utilities could exert undue influence over the regulators over time (which we are) then now is a great time to nibble at the dips. Profit from the transfer of stock from short term tranders to long term investors.