Solar stock prices are closely correlated to energy prices. Intuitively, rising oil costs make alternative sources of energy more practical for home heating use, in the same way that higher gasoline prices make electric vehicles more cost-effective to buy and operate. The recent energy rally has seen some positive response in several solar stocks, and while there is still more technical work to be done, the four stocks below are worth keeping an eye on if the conventional energy sector continues to rally.
Solar City (SCTY) spent the last two months forming a cup and handle base with rim line resistance in the $27.50 area. It broke above pattern resistance this month and has continued higher. Daily moving average convergence/divergence is overlaid on a weekly histogram of the chart and has been tracking along with price and is above its centerline on both timeframes.
The vortex indicator, which is designed to identify trend change, made a bullish green-over-red crossover as the stock was taking out the rim line, suggesting the start of a new uptrend. Chaikin money flow has been improving and is above its 21-period signal line but still below its centerline. Positive money flow is required to confirm the longer-term bullish case.
Solar Edge Technologies
Shares of Solar Edge Technologies (SEDG) - Get Report have been undergoing a consolidation process of their own since the beginning of the year. They have contracted in a large symmetrical triangle pattern, which has compressed Bollinger bandwidth and contained the 50- and 200-day moving averages. This is usually a precursor to a volatile move, and that move may be underway; the stock has broken above the triangle downtrend line this week.
The relative strength index is over its centerline, and the aroon indicator, which measures trend strength using a time component rather than price, has made a bullish crossover. Accumulation/distribution is crossing above its signal line, and the money flow index, a volume-weighted relative strength indicator is above its centerline.
The daily chart shows SunPower (SPWR) - Get Report still in early consolidation mode and trading in a narrow horizontal channel, within a larger triangle formation. Bollinger bandwidth is compressed on this chart, and a break above channel resistance could power a further move that takes out triangle resistance. Stochastics made a bullish crossover and is moving out of an oversold condition, and moving average convergence/divergence, while trending flat, is making a slight bullish crossover. Chaikin money flow is also flat, and while these readings are to be expected during periods of consolidation, they will have to improve to confirm any future breakouts.
First Solar (FSLR) - Get Report broke a six-month uptrend line this month and pulled back to former support in the $59 area. It has held long enough for the relative strength index to bounce off its oversold zone and move back above its 21-day average and has given moving average convergence/divergence an opportunity to make bullish crossover. The money flow index, which is again a relative strength measure of money flow, is bouncing off its oversold zone, but the Chaikin money flow indicator is still well into negative territory.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.