Pacific Ethanol stock is on the move after Bloomberg reported on September 5, 2019, the White House plan to boost ethanol consumption.

Bloomberg’s Jennifer Dlouhy and Mario Parker report that the top administration officials have come up with plans to increase the U.S. renewable fuel-blending quotas by 5% starting in 2020. The government officials are said to have been working on the details to boost U.S. biofuel demand for weeks. The report states that while President Trump has not signed off on the plan, he has in the past promised a “giant package” of changes for the industry. You can read the Bloomberg report here.

Pacific Ethanol (PEIX) is a producer of low-carbon renewable fuels in the United States. As of December 31, 2016, the Company owned and operated eight ethanol production facilities, of which four plants are in the Western states of California, Oregon and Idaho, and four of its plants are located in the Midwestern states of Illinois and Nebraska. As of December 31, 2016, its plants had a combined ethanol production capacity of 515 million gallons per year. The Company produces ethanol and co-products at its production facilities. Its plants are located on the West Coast and in the Midwest.

Pacific Ethanol stock on the daily chart did a downtrend channel breakout and hit its predicted price range (green) on September 6, 2019.

The volume surge in PEIX stock over the last few trading days has been incredible; however, the big profit taking as soon as the stock hit $1 on September 6, 2019, is extremely dangerous for longs.

Pacific Ethanol stock in the 1-minute time frame shows the stock opened high and then collapsed in a matter of minutes all the way back down to $0.79.

The implied volatility on the $2 and $3 strike call options have exploded higher.

The purple line is the Sept 20th calls and the cyan line is the October 18th calls.

Folks, this Pacific Ethanol stock looks like a classic gap and trap. Let’s look at the 30-minute chart so you can see the pattern.

PEIX stock chart in the 30-minute time frame shows a classic gap’n trap pattern.

The lower rim of the gap up is at $0.75 so that will be the significant pivot level to watch. If $0.75 holds next week and we get a continuation of the uptrend channel, that’s bullish. If $0.75 is broken and Pacific Ethanol stock falls back down into the $0.52 – $0.74 trading range, that would be bearish.

Pacific Ethanol stock does not meet the minimum requirement for inclusion in the long-term buy and hold GST Portfolio at this time; however, a short term momentum trade may set up next week if $0.75 holds as more analysts start talking about what the White House plan for ethanol means for the industry.

Disclosure: We do not hold any position in PEIX stock.