Sunday Edition: Things Are Looking Bright For Solar Stocks

July 2, 2017

Sunday Edition: Things Are Looking Bright For Solar Stocks

On occasion, I like to take a look back over the stocks I’ve written about to see how the technical patterns I’ve identified in their charts have played out.

In early January of this year, I wrote a piece for our sister publication, Direction Alerts, about Canadian Solar (NASDAQ: CSIQ). In the article, which you can find here, I discussed how CSIQ was nearing a breakout from a falling wedge pattern and could soon be beginning a new uptrend that could see its price potentially rising 100% or higher.

So where is CSIQ today?

Well, as you can see in the chart below which has the annotations from the chart used in the January article, CSIQ has broken out from the falling wedge and has begun a new uptrend.

Source: TradingView.

Seeing this successful breakout got me thinking about the solar industry in a broader context. If CSIQ was coming off of a bottom and beginning a new uptrend, I suspected that others in the sector may be doing something similar.

The news on solar has been interesting lately.

Somewhat against expectation, President Trump’s decisions to withdraw from the Paris climate accord and gut Obama-era climate policies haven’t stopped clean power, especially solar, from continuing to spread and solar companies are reaping the rewards.

In fact, in the month since Trump announced his intention to withdraw from the Paris agreement, shares of U.S. solar companies have gone up sharply.

SunPower (NASDAQ: SPWR), America’s second biggest solar panel manufacturer, is up 15% since May 30. Sunrun Inc. (NASDAQ: RUN) is up 44% from where it was a month ago. Vivint Solar (NYSE: VSLR) is up 84% from a month ago.

And looking at things from a technical perspective, nearly every solar company I looked at appeared to have very recently broken out of a bottoming trading range, or is just about to.

So why is solar going up when the news for it and wind power from Washington D.C. isn’t all that bright? Well, because what largely drives clean-energy installations across the country are equipment prices and state policies.

Solar power has been getting progressively cheaper. In fact, solar was the world’s cheapest source of electricity in 2016 and it is projected to be half the price of electricity from coal or natural gas within a decade.

State policies are becoming more friendly to solar as well.

On June 4, lawmakers in Nevada passed legislation to make solar more affordable for homeowners. The solar market had been dead in Nevada since regulators got rid of rooftop panel subsidies in 2015, but the new legislation has already been signed by Nevada’s Governor and will likely soon make Nevada—one of the sunniest states in the country—a booming solar market.

Similarly, in North Carolina, lawmakers introduced a bill this month that would lift the state’s ban on third-party leasing of solar panels, which would allow customers to rent the equipment for rooftop installation, significantly reducing the upfront cost of rooftop panels for residential customers.

Now, there are things that leadership in Washington D.C. could do that would affect the solar industry in the short run. Eliminating federal tax breaks for solar could significantly slow down solar companies, though with bipartisan support, these tax credits are probably not in any immediate danger. Trump could also impose tariffs on imported panels, which could slow installations significantly.

But despite these potential short-term hiccups, the long-term trend for solar is clear and right now, solar stocks are doing very well. And as I mentioned earlier in this article, nearly every solar stock I looked at, technically speaking, was breaking out of a bottoming trading range. Given this, now may be a very good time to take a position in a solar company.