Solar stocks have been hot this year. Sunrun Inc. (RUN) has gained over 300% year to date, and Solaredge Technologies Inc. (SEDG) is up nearly 200% this year.
Is the solar rally losing energy, or will solar stocks continue to brighten investors' portfolios? Let's take a look at the charts to find out.
Let's start with Solaredge. This stock has been trending higher since March, but look at the way it took off in late September (point A). After a run that saw the stock climb higher in nine out of ten sessions, Solaredge began to overheat.
This price action caused the stock's RSI (relative strength index) indicator to become overbought for several weeks (shaded yellow). A sharp decline on October 21st finally pulled the stock out of overbought territory.
My strategy for Solaredge would be to buy a little here, and then look to buy more if it drops to the stock's 50-day moving average, in blue. Notice how well the stock has bounced from that moving average in the past (arrows).
I'm less confident about Sunrun. This stock has closed below its 50-day moving average for two consecutive days, with no sign of a bounce.
Sunrun has been falling on heavy volume this month, which could be a sign that institutions are losing faith in this stock. I'm going to avoid Sunrun for now.
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Ed Ponsi is the managing director of Barchetta Capital Management, and is the author of three books for publisher Wiley Finance. A dynamic public speaker, Ed has made appearances around the world, in such diverse locations as Singapore, Dubai, London, and New York. For more information about Ed and his work, click here