Alternative energy remains a major theme among investors and
society as a whole. From an investing standpoint, solar energy,
in particular, offers active investors and traders a number of
liquid stocks to participate in.
First Solar (Nasdaq:
, a leading designer and manufacturer of solar modules, staged a
massive rally after the company gave positive guidance for the
current fiscal year, as well as for 2015 and 2016. The forecast
was better than analysts expected and also took investors by
surprise, which led the stock to rally more than 35% on the week
to levels last seen in 2011.
But not all companies in the space -- and not all solar stocks
-- are created equal.
In stark contrast to FSLR,
, which offers solar energy systems, dropped close to 12% last
week thanks to an unsatisfactory earnings report.
One stock that I routinely go to for calculated trades is
, a manufacturer of semiconductors and solar energy
On March 20, SunEdison announced a series of transactions that
are scheduled to take place concurrent with the initial public
offering of its semiconductor division, SunEdison Semiconductor (
), splitting it off from its more lucrative solar operations.
Among the announcements, it said Samsung Fine Chemicals will
purchase $100 million of SSL's ordinary shares at the IPO price
through a private placement. SUNE rallied 4% on the day, but
failed to break to a new high and has since pulled back.
The analyst community is mostly bullish on the stock. On March
Morgan Stanley (NYSE:
upgraded SUNE to "overweight" from "equal weight" with a $24
Keeping the positive news flow in mind, let's turn to the
charts to see what support and upside targets we can arrive at
for SUNE stock.
First off, the weekly chart shows a familiar picture -- one of
a stock still very much recovering from the big drop-off in 2007
It is important to note that SUNE's May 2012 lows coincided
with a significant positive divergence between price and the
Relative Strength Index (RSI)
, which made a higher low as the stock price bottomed. This set
the stage for the stock to rally from below $1.50 to its recent
highs in the low $20s, or roughly 1,400% in less than two
However, after such a strong rally, SUNE is just arriving at a
major resistance level dating back to the June 2009 highs, which
were the dead-cat bounce highs before the stock resumed its
downtrend into the aforementioned 2012 bottom. Overcoming this
resistance around the $21.30 level in a more significant manner
could easily lift the stock another 10% in fairly short
The daily chart of SUNE shows that the stock has settled into
a constructive- looking consolidation phase following the strong
Closer up, we see the stock needs to push past $21.75 in order
to create better separation from the long-term resistance level
SUNE has solid support at its rising 50-day moving average
(lower blue line), and as long as it stays above the 21-day
moving average (upper blue line), it stands a good chance of
resolving higher sooner rather than later.
On Friday, the stock once again found resistance near $21.75,
which could be blamed on noise around the quadruple witching
options expiration day.
Action to Take -->
-- Buy SUNE on a break past $21.75 resistance
-- Set stop-loss at $20.80
-- Set initial price target at $24 for a potential 10% gain in
three to six weeks
This article was originally published at
Solar Stock's Pending Breakout Could Result in
a Quick 10% Pop
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