Weekly Update: Is It Time to Buy Solar?
Good evening, and welcome to this week’s edition of Stealth Trades!
Follow the money. That is my investing mantra. And if you have been reading my weekly email for any amount of time you know that means focusing on the strongest areas of the markets – the ones where money is flowing into.
For the last several months, leadership has been clear – nuclear, quantum computing, AI, crypto and metals.
But I am beginning to see signs of life in a once forgotten corner of the stock market…
Solar stocks have been complete garbage for the last four years. After peaking in 2021, the solar sector has marched steadily lower as can be seen in the Invesco Solar ETF pictured below.
That is beginning to change, however.
The market strength scan I run each week shows the solar group quickly marching up the ranks.
Solar energy is now one of the top-performing sectors over the previous one, two and three-month periods.
This could be the start of a new Stage 2 move, and it is one we need to stay on top of. Because these stocks, especially after falling 80-90%, are capable of making big moves to the upside.
This is not an area I want to get super aggressive in right away. But it is worth taking a stab at a few setups here, and… if they work… start putting our foot on the gas.
Canadian Solar (CSIQ), for example, is coming out of a 10-month base formation.
Higher highs, lower lows, shallowing pullbacks… It has everything I want to see in a stock coming off its lows.
This was a $65 stock a few years ago. Today it trades for $12. If this thing gets legs, it could easily double or triple from here.
JinkoSolar (JKS) is another one…
After nearly doubling off the April lows, the stock is consolidating in the $23-$25 range where it found resistance earlier this year. After absorbing this supply, the stage will be set for another possible surge higher.
SolarEdge (SEDG), although choppy, is showing similar characteristics…
This stock fell 95% from its post-COVID highs. Three years ago, it was worth $360 a share. It now trades for just $27.
Right now, the action is volatile. Solar companies are regrouping after the federal subsidies that drove revenue growth a few years ago have been officially cut off.
But the market is never wrong. And whenever I see strong broad-based price action like this, positive news typically follows.
Will subsidies be back on the table? Has there been a technological breakthrough that will bring down production costs or increase efficiency? Have Chinese tariffs strengthened domestic manufacturers?
I don’t know. And frankly… I don’t care. Someone is buying, and they’re buying big. So, I am adding this to my list of groups to focus on.
If you don’t already have one, make a watchlist of solar stocks you can flip through periodically. In fact, I’ll save you some work. Start with these:
FSLR, ENPH, NXT, HASI, RUN, SEDG, ARRY, CWEN, ENLT, SHLS, JKS, CSIQ, DQ, ENRG, SPWR, RNW, MAXN.
I probably missed a few, but that’s a good list to start with.
Best wishes for your trading,