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Two Energy Stocks Likely to Make It

By Quint Tatro, Minyanville contributor

NEW YORK (Minyanville) -- The promise of the solar sector has been spotty to say the least. From a fundamental standpoint, there have been many fits and starts, closing of plants, consolidation, and government subsidies to try to keep the dream alive.

Compressed natural gas is also an arena that has the potential to solve many of our energy needs and has yet to reach its full potential. In the end, there will be a few successful companies that make it through the gauntlet and deliver the energy needs of the next generation. I want to revisit two names I see as poised to capitalize on the demand.

First Solar (FSLR) is perhaps the best-known solar company in a fast-changing arena. In the 2007 bull market, First Solar ran up tenfold on brightening prospects for the solar names. With competitor LDK Solar (LDK) reporting outsized earnings on Monday, the entire sector enjoyed a nice pop. (First Solar reports on February 17.) From a chartist's viewpoint, many names are particularly attractive at current levels. In fact, I have positions in China Sunergy (CSUN), SunPower (SPWRA) and Guggenheim Solar ETF (TAN) for my clients.

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The only fly in the ointment for First Solar has been the manic action it has undertaken over the years. From a high north of $300 in 2008, First Solar has oscillated in a wide range, touching $85 the same year. Since the market bubble has seemingly subsided in its extreme emotional reactions, First Solar's chart has tightened up to the point that it has once again become attractive. On the weekly shown above, First Solar is holding above the key long-term 50-period moving average, which is flattening after a two-year descent. Also visible are the ever-narrowing price swings that made holding First Solar a nightmare.

With the tightening pattern, prudent stops can now be put in place that don't expose a trader's capital to undue risk. While I'm not currently an owner of First Solar stock, I like the risk/reward at these levels with two separate areas for stops highly visible. The recent swing low around $120.90 could be a wider stop, or traders could use the flattening 50-period, which is currently around $127.50. Either way, First Solar is one to watch in the solar arena.

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