Shares of solar energy stocks such as First Solar, Inc. (NASDAQ:FSLR) and SunPower Corporation (NASDAQ:SPWR) have seen a serious jolt back to life over the past couple of months. While FSLR stock for example remains in a well-defined longer term bearish trend, the near to intermediate term trend in recent weeks has turned decidedly bullish. The stock is now worth a closer look.
Talk to any bull or bear on solar energy stocks and you are likely to get a wide variety of reasons for their views. This dispersion in views is particularly wide in stocks that belong to promising industries (clean energy for example) yet have not been able to catch a real bid for years.
To make the process of finding new trading and investing ideas less emotional and more efficient, I measure trends in multiple time frames and pay close attention to the rate of change in trends of stocks and indices. My proprietary market scanners (TST Market Scanners) allow me and my clients to track these trends, and FSLR stock among other solar names popped up on these scanners a few weeks ago.
In mid-June, shares of solar companies saw a flurry of bullish activity a day following word that U.S. President Donald Trump is considering placing solar-power panels on his proposed wall along the Mexican border.
FSLR Stock Charts
To give some perspective around FSLR stock, let’s note that despite the recent rally, the longer-term picture remains decidedly negative.
The stock still has plenty of legwork left to do until it even kisses the black diagonal line of resistance or the red 200 week simple moving average. Both of those technical lines currently reside around the $50 mark, which may indeed be a next upside price target for the stock.
On the daily chart, we see that it likely does not take too much imagination to envision an inverse head and shoulders pattern, which by definition should have bullish implications for the stock. Note that the selling spree in March was quickly met by buying and an up-gap in early May, thus exhibiting seller exhaustion.
In the second half of May, FSLR stock built the right shoulder of this inverse head and shoulders technical pattern, just as the medium term moving averages (50-, 100- and 200-day — yellow, blue, red lines respectively) started to turn higher. The subsequent breakout in June and further so yesterday Wednesday July 12th is further confirmation of this bullish pattern.
A next upside target around the $50 now looks likely for FSLR stock, while any notable bearish reversal is a stop loss signal. Remember, one can always get back into the stock if it turns back up.
As a side note, First Solar is scheduled to report earnings on Aug. 2 and holding “trading positions” through the earnings report is a risky way of making money in the stock market.
Check out Anthony Mirhaydari’s Daily Market Outlook for July 13.
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