It’s certainly not the first spot bullish investors might look to for trend trading given today’s disbelieving political climate, but solar stocks have been hot this year and the price charts continue to point to sizzling profits. Let me explain.
As any investor with more than a passing interest in the market knows, it’s been a terrific week for the broader averages. For its part the S&P 500 has put together percentage gains and a marginal new all-time high above the ubiquitous October and May corrections and it’s double topping pattern. But that’s nothing compared to what solar stocks have been doing.
Despite today’s macro landscape of uncertain industry-related tariffs, subsidies and a U.S. presidential administration dismissive of climate change, solar stocks have been quietly shining. The Invesco Solar ETF (NYSEARCA:TAN) is up about 35% since October. And since May’s trade war-driven sell-off in the market, shares of TAN have added nearly 11% above its April 30th close and adding to its impressive and largely under-the-radar gains in excess of 51%.
To be sure, there’s a lot of vocal critics of solar or at least solar stocks and why they need to be avoided. At the end of the day though, if the charts of First Solar (NASDAQ:FSLR), SolarEdge Technologies (NASDAQ:SEDG) and Jinko Solar (NYSE:JKS) are what being a contrarian looks like, I say let’s simply focus on extracting more profits from friendly price trends filled with skeptics.
First Solar (FSLR)
First Solar is the first of our three solar stocks. This heavyweight also happens to be the sector’s largest outfit with a mid-cap valuation of about $6.6 billion.
The company’s most recent earnings report was mixed and saw a worse-than-forecast loss for the quarter. Still, FSLR stock did affirm its full-year profit guidance of $2.25 to $2.76 per share and boosted its sales outlook to $3.5 billion to $3.7 billion and above Street views of $3.37 billion.
Year-to-date gains of around 37% for this solar stock are slightly trailing TAN’s performance. However, a massive inverse head-and-shoulders pattern on the weekly price chart looks poised to begin the job of catching up to the solar ETF and even lead the sector in 2019’s second half.
The FSLR Stock Trade
Buy FSLR stock if shares can trade above $64. This is a second attempt entry to go long above the April consolidation high of $63.82. Set a stop-loss beneath support below $59.25 and the 50% retracement level. On the upside, taking initial profits as shares test the pattern neckline near $77.50 makes sense off and on the price chart.
Solar Stocks #2: SolarEdge Technologies (SEDG)
SolarEdge is the second of our three solar stocks. The Israeli-based company manufactures optimized inverter systems for residential, commercial and small utility-scale solar installations.
Most recently, Goldman Sachs upgraded shares. The firm sees major tailwinds for the U.S. residential market including the 2020 California New Homes Mandate and an end to the 30% ITC tax credit triggering additional demand for solar upgrades.
The better news? Goldman’s move from sell to neutral for SEDG stock and price lift from $35 to $52 still shows Wall Street is at odds with demand from investors. Shares of this solar stock are trading about 14% above the analyst’s price target.
Moreover, with SEDG breaking out from a short base in the upper one-third of its corrective cup-shaped pattern — shares deserve a buy recommendation today.
The SEDG Stock Trade
Buy SEDG stock today with an initial stop-loss below $54.50 to keep exposure limited to justifiable levels on and off this solar stock’s price chart. On the upside, trimming profits on a test of the pattern and all-time-highs near $71 looks appropriate.
Solar Stocks #3: Jinko Solar (JKS)
Jinko Solar is the last of our three solar stocks. It’s a China-based outfit and as part of Goldman’s sector upgrade was blessed with a target lift from $9 to $13.
If you thought analysts were dismissive of SEDG, the price raise in this solar stock is roughly 41% below the market price. With Goldman keeping its sell recommendation on JKS stock, this bearish view not only takes the cake, it’s one contrarian-oriented bulls should want to devour!
Technically, shares of this solar stock have pulled back to test support of a key breakout from a congestion pattern within Jinko’s uptrend of several months. Now and with a daily chart forming a bullish hammer candlestick pattern, investors have a low-risk, high-reward means to buy JKS stock.
The JKS Stock Trade
Buy JKS stock next week if shares can confirm a reversal off support. If required, a stop-loss beneath the pattern low makes good all-around sense. Alternatively, if bulls have the muscle to keep this quiet rally moving higher, taking profits near $26.50 – $27 and long-term channel resistance looks like equally smart business.
Disclosure: Investment accounts under Christopher Tyler’s management do not own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.