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Solar Stocks Technical Analysis

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A thread dedicated to tech. analysis

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Greetings,

I have some experience in technical analysis that I will be happy to share on this thread and hopefully it will be useful for members as well as for my own trading.

In 1931, Richard Wyckoff published his seminal work on stock trading and investing The Richard D Wyckoff Method of Trading and Investing in Stocks: A Course of Instruction in Stock Market Science and Technique. In it ,he describes a system of analysis based on the interpretation of Price and Volume, that enables a trader or investor to make accurate and consistent forecasts about the most probable action of any particular asset.

 

I open this thread in order to share my analysis of the solar sector, based on the aforementioned method, as well as of particular stocks that I deem suitable for investing or trading.

 

I have been following the sector for a couple of years, since I am firm believer that climate change is the biggest challenge facing our species. In this respect, solar will be an integral part of the solution and I see it as an industry that will grow enormously for decades.

From a technical perspective, I see the sector as having completed a bottom in June 2016 and I believe we are witnessing the initial stages of the bull market. In the following charts I will be sharing my reasons for holdings this view.

 

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On the longer term monthly chart, I see two significant developments. Firstly, buyers came in to support price above the 2011 lows (1-blue line);  Following Trump's election a final round of selling ensued, most probably elicited by the administration's anti renewable energy stance. However, scarcely a month later, around mid December, buyers stepped in and begun accumulating these stocks. This brings us to the second relevant development (point 2); Buyers kept bidding up prices with enough conviction to break the downtrend that had been in place since the market peaked at around 50. This was the first sign of selling exhaustion and a sign that a potential bottom could be in place.

 

The weekly chart shows a more detailed picture of the most recent action. In it I have noted point “A”, which shows how after the abovementioned downtrend break, there was another wave of selling that was met by further buying, supporting price above the December lows and resulting in a successful test (A). From here onwards, price has made a series of Higher Lows, and we now have an uptrend that remains intact. The most recent developments show buyers stepping in at the black horizontal support line at “C”, and eagerly attempting to accelerate the pace of the advance, as shown by the steeper angle of line “D”. In order for this new trendline to be confirmed, buyers must be willing to raise the bid above the most recent highs.

 

It is worth noting how even with the constant flow of bad news coming from the White House (Pulling out of the Paris Agreement, the removal of tax credits, the potential for import tariffs) price is continuing its merry way northward. That is to say, “someone” or some group of people are making use of the bad news to load up on the sector. We could debate and hypothesise over who is buying up and why, what kind of privileged information they might have; maybe they know that this tariff talk and Paris Agreement withdrawal is nothing more than a negotiation tactic, they could be certain that the clown will be impeached, or perhaps there is a growing realization that solar will play a pivotal role in providing energy for the world, regardless of what the USs position might be.

Fortunately for the price action reader, one needn't waste much time conjecturing, since the aggregate action and beliefs of all players are shown on the charts. For now, and unless price breaks the current stride; the charts show a buoyant market, with few sellers and eager buyers that are happy to keep bidding up prices.

 

Edited by tupapa
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Once the technical position of the sector has been established, and in this case it is a very favourable one for the bull-side, Wyckoff asks us to focus on the strongest stocks in the sector. This makes sense, since the strongest stocks are simply those in which buyers are forced to bid up prices because sellers are unwilling to unload what they perceive to be valuable.

 

sedg.png

 

With this in mind, I would like to begin the individual stock analysis with SolarEdge, which has almost tripled in value since Trump's election.

On the monthly chart, the explosive buying power is apparent, especially when compared with the previously discussed solar sector. I have annotated a red line showing previous resistance which buyers are hurdling with at the momento.

On the daily chart, the most recent action shows a meaningful dynamic. Point A shows a big volume spike, that was the result of sellers panicking after the import tariff decision, but notice how price quickly rebounded showing buyers saw this as an opportunity to load up on all the fearful supply. The lessening of supply is confirmed at point B, when the next round of selling is a lot smaller and is once again met with buying. The complete dry up is confirmed at point C, when buyers are forced to bid up prices fairly dramatically because sellers are nowhere to be seen.

Currently,  the diminishing volume shows less participants are willing to trade at current prices. Eventually, fresh buying or selling will come into the market, forcing prices up or down in order to find trades. The upwards sloping “wedge”, the strength of the sector and the strength of the stock relative of the sector suggests a higher probability of this taking place to the upside. 

A long stop entry order can be place above the current resistance level around 30.


 

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China Singyes Solar is another stock that I currently have in focus.

 

singyes.png
 

On the monthly chart, price tested a critical support at point a and buyers came in pushing prices higher. Currently, sellers are retesting the level at point 1.

Zooming into the retest on the daily chart, there is an indicatation of buying strength as shown by the break of the downtrend at point 2. After this there is a further retest of the lows at point 3 and once again buyers are supporting Price.

Further buying bidding prices above 2.7 would confirm the dry up of selling and a long trade could be entered anticipating higher prices.

 

Edited by tupapa

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Tupapa, thank you for the contribution. Most of us trade on the US exchanges, so a review of companies of this area, like SEDG is something I personally like to read. thanks

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I have wished that there is some sort of AI layer to investing which will sort of give you a heads up with the technical analysis.  I don't know enough about tech analysis, but it seems that it is essentially pattern recognition.  You are looking for certain patterns: double bottoms / tops,  changes in volume, coupled with breakouts or failures.  These sorts of patterns can be sensed by an algorithm.  

Ultimately I think it is more fundamentals than technicals which drive stock prices, however ignoring the technicals it's easy to step in front of a bus.  It would be great to have a system which gives technical warnings as notifications to a stock owner.

There was one site that seems to be working on just this idea:  https://scan.alpaca.ai   

I need to give it a deeper look to see if it could help out.

 

Yes looks like the site is using pattern matching to name certain technical conditions.

https://scan.alpaca.ai/symbol/CSIQ/  (last two signs are bullish, so that's good)

https://scan.alpaca.ai/symbol/FSLR/

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Technical Analysis “a la Wyckoff” is less about finding patterns and more about reading the record of transactions (via charts) in order to establish the position of the market; Bullish, Bearish or Neutral.

Both Sedg and China Singyes solar entries have been confirmed by the absence of selling.

    0XUY38GPp-j-WyR7ecBmU9CWRSCsGbNyWWq-hy9GPNAgLM3grz11lsjL420EKjlcsC_29wkXZiU8L8u5xof1S2Wn5foflAAl6LYVlcYh5DbmdbBGpfySJdK6mQvAOqi2NJDYjyKw

Here is my take on another good candidate for a trade, JKS.

On the monthly, I have annotated the following;

At point  1, the downtrend is broken, this was the first warning that the trend was changing since the buying was strong enough to halt the decline.

At point 2 price kept bouncing of the uptrendline showing the confirmation of a new bullish uptrend.

Point 3, shows a previous resistance line, at which last week buyers decided to step in and support prices.

On the daily chart, point a shows how the abovementioned buying from last week was strong enough to break the stride. Currently sellers are attempting to push down prices, but buyers are stepping in, this is shown by the narrowing of the most recent bearish bars. If the selling subsides here, buyers will be forced to bid up prices once again, establishing a tentative range between 22 and 30.

I will be monitoring JKS and will be entering a possition if buyers can push prices higher during the coming trading sessions.

 

image.png

image.png

Edited by tupapa

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Notice how JKS is still holding the bid here and volume is drying up, meaning that less traders are willing to interact at current price levels. If new buyers come in they will be forced to bid up prices in order to find new sellers.

Long entry above yesterdays high.

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Here´s my two cents on CSIQ, which from what I´ve been reading here and elsewhere is a fundamentally sound company;

At point 1 the downtrend was broken and it´s been sideways action ever since. I have marked the diminishing volume which suggests accumulation as less shares are placed on the market.

If demand shows up, traders will be forced to bid up prices in order to find fresh supply. I am long if price breaks and holds above the upper limit of the very narrow current range (15-18)

 

CSIQ.png

Edited by tupapa

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TAN confimed the uptrend with higher highs last week, this sector is as bullish as they get. Now it´s a case of holding on to the winners, letting them run and adding on retracements.

I will be posting new potential entries once the sector corrects. For now I have my eyes on Canadian Solar, I will go long if price breaks and holds above 18 for the abovementioned reasons.

Happy trading, enjoy the forthcoming upwaves.

Edited by tupapa

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