The S&P 500 closed Tuesday nearly unchanged. But underneath the surface, there were big gains to be had across a variety of sectors. Perhaps the most impressive was the monster rally in solar stocks. They peppered the leaderboard with some names rising over 10%. When something soars while the rest of the market is snoozing, I take note.
Perhaps you should too.
Today, we’re exploring three of the best solar stocks to buy. All of their charts are piping hot. Skeptics could argue overbought conditions are mounting. But whether you buy now or wait for a lower-risk pitch, there’s no denying solar is a must-follow theme over the coming month. If nothing else, Tuesday’s moonshot in solar shows the momentum trade is still very much alive.
That said, here are my three favorite solar stocks to use for gaming further strength:
Solar Stocks to Buy: Invesco Solar ETF (TAN)
Rather than picking which players will outperform the overall industry, how about buying the whole bucket? That’s what the Invesco Solar ETF offers. Aside from the obvious perk of diversification, you also don’t have to worry about earnings reports.
The cleverly named TAN exchange-traded fund has risen for eight of the past nine trading sessions. But it’s not just red-hot in the short run. The Street’s go-to ETF for diversified solar exposure is up 234% for 2020. No matter how you slice it, investors see a bright future for the solar space. As much as I’m a fan of the powerhouse trend that defines the fund, it is extremely extended in the short term. If you must pile-in now, I suggest at least starting with a partial position. That way, you can add size once the inevitable pullback arrives.
Unfortunately, the options’ liquidity isn’t great, so if you’re going to bet, then purchase shares outright.
First Solar (FSLR)
First Solar is one of the most popular solar stocks available. It also boasts better liquidity in its options than TAN, so spreads and the like are in play here. Tuesday’s rocket launch sent FSLR stock up over 9% on heavy volume. Participation swelled to nearly 5 million shares traded, or roughly double the average daily volume.
It was the third accumulation day seen over the past six trading sessions. With the gain, FSLR stock cleared the century mark and now sits at its highest level since 2011. We also took out an old resistance zone that stymied the previous two rallies. While prices have gained for six straight sessions, Tuesday marked an impressive breakout from a two-month basing pattern.
Implied volatility increased on the breakout as traders rushed into the options market. The implied volatility rank of 37% means spreads are preferable over buying calls.
The Trade: Sell the Jan $92.50/$87.50 bull put spread for 71 cents credit.
Canadian Solar (CSIQ)
Instead of looking at the daily chart of Canadian Solar, I’m displaying the monthly because it shows just how impressive this year’s run to a record has been. Unlike TAN and FSLR, which haven’t risen above their 2007 highs, CSIQ has cleared all previous peaks. It means there isn’t a single bagholder on the planet. Every single shareholder on the planet is sitting in a winning position. And every investor who used to own it is now wishing they still did.
Even though CSIQ stock looks extended on the monthly time frame, it just broke out of a multi-month base. Dips are a gift and worth buying. Like the previous two tickers, I’m hesitant to go all-in given overbought conditions. Either wait for a retracement toward $47 or enter a partial position now.
The Trade: Buy the Feb $55/$60 bull call spread for $1.75.
On the date of publication, Tyler Craig did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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