A Quality Nuclear Stock No One’s Watching

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BY LUCAS DOWNEY, EDITOR, TRADESMITH’S ALPHA SIGNALS

Let’s wind back the clock to two months ago…

It was the craziest month for markets since the pandemic crash of 2020.

Volatility exploded to rare heights… And the bear-killer signal flashed.

It’s been a runaway train ever since the April 8 low. The S&P 500 has rallied a mind-numbing 20%.

Congrats if you played along with the bull wave.

But if you played along with the doomsaying instead, don’t get too discouraged. I see a lot of gas still left in the tank for this newfound bull market.

Just last week, I gave powerful evidence that ultra-breadth like we are witnessing today forecasts big gains ahead.

Inside of that article I mentioned a nuclear energy name that has the makings of a great potential investment: Talen Energy (TLN).

Today I’ll be taking that bullish view a step further… with two must-see signal studies that triggered recently.

We’ll be looking at an explosive, ultra-rare upside move… and a blistering reading in the Relative Strength Index (RSI).

If you’re hunting for the next big winning name… This could be the ticket.

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Talen Is an All-Star Nuclear Stock in the Making

Investors are finally getting excited about the nuclear space. Especially now that large hyperscalers like Meta Platforms, Google, and Amazon are making strategic energy deals for their AI infrastructure initiatives. (Disclosure, I own all three of these stocks.)

Talen, which has been around since 2014, is a major beneficiary of this trend.

The big announcement that made waves with me recently was the headline regarding Amazon and Talen. The press release leads with:

Talen enters power purchase agreement for 1,920 megawatts of carbon-free electricity at full quantity to support Amazon operations, and explore SMR [small modular reactor] technology

This news is part of the reason TLN shares have been on a tear recently.

Over the past year the stock has vaulted 148%. Over the past two months, shares have surged 42.7%:

Now, normally it can feel like a bad bet to wager on a stock with such strength.

But I like to peek under the hood first before deciding on a trade. And this engine is purring.

Talen has seen enormous fundamental growth in recent years with 2024 revenues of $1.8 billion, which is up from $874 million in 2022.

Net income has expanded to $998 million in 2024 from -$866 million in 2022. These are healthy trends.

Now, back to the chart above. Shares popped 42.7% in 42 trading days. If you believe shares are due for a pullback… You’re likely correct.

That said, I’d encourage you to consider buying any dip. Here’s why.

Back to 2023, shares of Talen have gained 42.7% or more in a two-month timeframe just 16 times.

What comes next is a small dip… followed by a big rip.

Here’s how Talen shares perform post rallying 42.7% or more over 42 trading days:

• 1 week later, shares drop 2.9%
• 2 weeks later, the stock drops 4.5% on average
• 1 month later, shares are flat
• But 2 months later, the stock averages an 18.3% gain

Check it out:

Will Talen shares digest some of its recent gains? Likely so… And that can be a great opportunity in the weeks ahead.

But let me add another log to this fire.

I found one more signal that will reinforce this bullish stance.

Talen’s recent thrust has recorded a 14-day RSI reading above 80. Over the past year, this overbought signal has hit four times:

This is a rare situation… as I was able to find just 37 instances where the RSI was 80 or higher.

While I realize the trading history is limited for TLN, the forward medium- to longer-term performance after this elevated RSI is simply staggering.

Check this out.

Here’s how Talen shares perform post an RSI reading or 80 or higher:

• 1 month later, shares gain 9.8% on average
• 3 months later, the stock jumps 24%
• 6 months later, the stock rallies 82.5%
• 12 months later, the shares average a 124.6% gain

Now, to be clear, should you expect this performance? No.

Many of these instances were from when TLN traded at a fraction of its current market cap. The larger a company grows, the less it’s likely to make big moves.

Nonetheless, we’re talking about a high-quality growth stock with two power signals suggesting that potential gains are coming throughout 2025 and beyond.

Plus, use TradeSmith’s Quantum Score as the deciding factor, and you’re staring at a smart play…

Talen shares rank as one of the highest in our universe with a Quantum Score of 82.8. This signals both powerful technical and fundamental attributes.

And while TLN is the highest-ranking nuclear company in our system, there are a ton of other hot nuclear stocks out there. Constellation Energy (CEG), Oklo (OKLO), BWX Technologies (BWXT), and NuScale Power (SMR) are just a handful of the ones making headlines.

In fact, New York Gov. Kathy Hochul just announced the development of a brand-new nuclear power plant yesterday.

The new plant, which will be owned and operated by Constellation, will provide electricity to about 1 million homes in New York once completed. (CEG stock rose 3% yesterday on the news.)

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Regards,

Lucas Downey
Editor, TradeSmith’s Alpha Signals