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Solar Stocks Technical 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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43 minutes ago, tupapa said:

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.

Tupapa,

Thank you for your analysis.  I have a question, how do you determine if and when CSIQ "breaks and holds above 18?"  Breaking 18 is an easy part, the holding part is not so easy to determine.  How many days and how much above 18 (or pull back) do you consider that it holds above $18?

If you will buy above $18, why not buy it now at some discount?  Are you afraid that if will drop from here and will never break $18?  Thanks.

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DQ.thumb.png.e837a2451d9038a35307abb3e6682bcc.png

I will not buy until it breaks 18$ because price could remain in the current range (15-18) for months. As Livermore would put it, "The point is not so much to buy as low as possible, but to buy at the right time.

And the right time is right before the stock begins an uptrend, so even though I won´t get the lowest price, I don´t want to allocate funds to a stock until it starts to move higher.

Regarding the holding above 18$ part, onced price breaksout, I look at a short time interval like the 30m or the Hourly charts. I want to see price holding above or around 18, and the bars narrowing down during the retracement, which would mean that buyers are still coming in and sellers are not strong enough to push price back into the range.

Of course price could gap up and I could miss the entry, but the market generally presents one with more than one entry oppotunity, for instance with DAQO there are several Opps, one of them could be taking place right now.

First there was the Breakout, (1) which is the most agressive and would require you to be watching the tape during the trading session, in order to see if buyers can keep price from falling back into the range.

Then there was the test (2), which was arguably the best entry since the breakout had been confirmed and a narrow stop loss could be placed below 30.

Finally there is the current retracement (3), which entails the highest risk but is still encouraging. Notice how the most recent daily bars are very narrow, and the volume is shrinking showing diminishing selling interest but ample buying interest (otherwise the down bars would be a lot wider).

If the selling dryes up here and a fresh round of buying comes in (earnings, sector related or any other reason), prices will go up in order to find new sellers that are content with their proffits and happy to let go of their shares.

I hope this helps

 

 

 

DQ.png

Edited by tupapa
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Unlike the prior times it ventured above 18, this time price is holding above 18 for a few hours now. I am long 1/2 of my total, will go long the ramining after a daily RET

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59fb815d68202_CSIQhourly.thumb.png.8775cc9402c844e9d0133af2a18f19cb.png

Price action in CSIQ is so far very promising. Upon my publishing my last post, there was a strong breakout of resistance on large volume. After the breakout, price retraced on diminishing volume, but look at the narrow bars, this shows lessening selling pressure but buyers still eager to take the shares on the market.

The last hour there was an increase of volume, new buyers came in and price shot upwards in orther to find new sellers.

This is classic retracement action and I will be entering my full possition tomorrow, if price moves above the most recent hourly bar.

As for DAQO, yesterdays price action confirmed the retracement that I pointed out on Monday and price is now following a steeper angle of ascent.

 

Edited by tupapa
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40 minutes ago, tupapa said:

59fb815d68202_CSIQhourly.thumb.png.8775cc9402c844e9d0133af2a18f19cb.png

Price action in CSIQ is so far very promising. Upon my publishing my last post, there was a strong breakout of resistance on large volume. After the breakout, price retraced on diminishing volume, but look at the narrow bars, this shows lessening selling pressure but buyers still eager to take the shares on the market.

The last hour there was an increase of volume, new buyers came in and price shot upwards in orther to find new sellers.

This is classic retracement action and I will be entering my full possition tomorrow, if price moves above the most recent hourly bar.

As for DAQO, yesterdays price action confirmed the retracement that I pointed out on Monday and price is now following a steeper angle of ascent.

 

What percentage of your portfolio you now have for CSIQ?  You show none.

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Well, I have my investment account, today I replaced 10% Scatec Solar with 10% CSIQ, I continue to hold SMA, Sedg and mostly DAQO for the long run.

Then I have my trading account where I have a sizable CSIQ possition for trading purposes, if tomorrow I get an entry trigger, I will have my trading account allocated as follows;

CSIQ 60%

JKS 20%

Sedg 15%

GCl POLY 5%

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Tupapa, were you able to invest full position in CSIQ?  Did you consider CSIQ "break and hold" $18?  How high should it get?  I think Dydo's prediction of $20 before Nov. 9 might come true.  It might go as high as $22 if earning and announcement are good.  Good play on your part.

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Yes I entered the second 1/2 on Friday above Thursdays high. Price action is being bullish and I see no reason to exit unless price falls back into the range, below 18.

Profit Target is more challenging for me but I'm going to try to let these run for as long as possible as long as price stays strong.

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Tupapa, The street treat CSIQ as if it is company specific issue.  Other solar stocks seem unaffected.

So, now CSIQ solidly broke the $18 support.  Is it broken now and what is your take on it, technically?

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On 9/11/2017 at 5:22 PM, Jetmoney said:

Tupapa, The street treat CSIQ as if it is company specific issue.  Other solar stocks seem unaffected.

So, now CSIQ solidly broke the $18 support.  Is it broken now and what is your take on it, technically?

Yes, for me it is no longer a buy unless it can hold and break above 18.12


Thursdays plunge had huge volume, but yesterday prices rallied which shows further buying interest. It is possible that this was the final washout used by buyers to accumulate the final amount before prices take of.

But I'd wanna see a test above 18.12 to take some stops and see if there are further sellers lurcking.

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A couple of continuation set-ups with good risk reward, green is entry, red is stop loss.

Solar Noviembre.png

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CSIQ is once again showing a very favourable technical picture;

5a14ae28f2249_CSIQ21-11.thumb.png.3ba65024a9603d2e4ce7e24302604608.png

At point A there was a big round of selling back into the trading range which was caused by the worst than expected earnings.

However, the following day again, on notably high volume buyers supported prices and were able to push them back up towards the upper limit of the trading range, around 18.14.

At this point buyers refrained from bidding up higher, and for the past 6 sessions prices drifted lower on anemic volume, suggesting little professional participation.

Today price ventured above the trading range upper limit, failed to find new buyers and closed close to 18.14.

The above described action, suggests that the big plunge on earnings release was a washout of weak holders that was used by experienced players to accumulate shares.

I will be entering long tomorrow if prices show strength, that is, if buyers are forced to bid up prices above today's highs. Such action would suggest the accumulation camping has been completed, and new buyers will be forced to bid up prices due to the lack of supply at current levels.

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Tupapa,  I was eyeing this company HIMX for a few months now when it was below $8.  This company's stock price is very volatile and may fit your style of investing.  What do you think of it?

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On 11/30/2017 at 11:24 AM, Jetmoney said:

Tupapa,  I was eyeing this company HIMX for a few months now when it was below $8.  This company's stock price is very volatile and may fit your style of investing.  What do you think of it?

Hello Jetmoney,

I had a look at the chart and it looks horrific, there´s no way I would touch a stock that makes lower lows year after year. There is no financial syndicate supporting it, otherwise price wouldn´t be plunging as it keeps doing. I would advise you to stay away from it.

As for myself, I am fully invested into Solar, I don´t have any capital left, I just want to see CSIQ finally breaking out so I can let both stocks run and lower my engagement with the market.

 

 

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11 minutes ago, tupapa said:

As for myself, I am fully invested into Solar, I don´t have any capital left, I just want to see CSIQ finally breaking out so I can let both stocks run and lower my engagement with the market.

 

 

The day CSIQ finally breaks out will be a day when there is much jubilation on this forum.  I'm not even trading it anymore.  Been holding for several weeks now.  Not taking a chance I miss a penny of the move.  I'm only trading FSLR right now, so eager to see if we get any analyst day bump.

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6 hours ago, Mark said:

The day CSIQ finally breaks out will be a day when there is much jubilation on this forum.  I'm not even trading it anymore.  Been holding for several weeks now.  Not taking a chance I miss a penny of the move.  I'm only trading FSLR right now, so eager to see if we get any analyst day bump.

The good think is that like Daqo, if it eventually breaks out of this prolonged period of accumulation, there will be little supply left on the market so we can expect the stock to swiftly rally towards its 2014 Highs.

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In case anybody else is interested in this accumulation stuff, I am sharing my analysis of DQ and CSIQ since both charts are so remarkably similar and they illustrate well this critical market dynamic.

In both charts I have annotated the two major accumulation campaigns of the past decade; First the 2012-2013 campaign, second the 2016-2017 campaign.

Notice how during both campaigns volatility quiets down (the bar narrow) and volume diminishes. This is because a financial syndicate (or a number of them) have decided that a stock is undervalued and they wanna run a campaign, the best time to do this is when there is general apathy or outright despair towards a particular sector, a company or perhaps the whole economy.

So the professional syndicate places bid orders at a narrow range and they spend weeks or even months buying up as much stock as they can handle. Eventually supply dries up (no volume left) there are no sellers left and as market sentiment towards the sector improves and new buyers come in they are forced to bid up prices. Why? Because there is no supply left at current prices since the professionals have accumulated all that was on offer.

So, following the above logic, IF the accumulation in CSIQ is  completed successfully, I would expect volume to pick up and prices to increase sharply in order to find new sellers, just like what happened with DQ some weeks ago.

 

CSIQ DQ.png

Edited by tupapa

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23 hours ago, Mark said:

Just curious, tupapa, what do you do for a living?  Full-time trader?  

I am currently studying a masters degree in philosophy. I am an ecologist and I would like to develop a career that makes some contribution to solving climate change.

I have also spent considerable time studying markets and specifically Wyckoffs lessons from the 1900s. But I´m not a professional trader.

Edited by tupapa
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